The war in Ukraine is affecting the global economy via higher commodity prices, supply-chain disruptions and worsening sentiment. These transmission channels are jointly causing inflation to spike and growth to slow sharply, especially in Europe. There are already warning signs in US economic data, with inflation holding at a 40-year peak and consumer sentiment declining. US GDP growth could slow sharply in 2022-2024 as the post-pandemic rebound starts to wear off and rising inflation and interest rates start to bite. The baseline view remains that the US economy will avoid an outright recession, but risks to this outlook have risen. Significant and frequent power supply disruptions have proven to be a long-term hindrance to the South African economy’s recovery. In addition, inflation is rising to levels last seen some 13 years ago, driven mainly by excessive wage demands and energy related price escalations. Loadshedding effects will be showing up particularly in the second and third quarter numbers of 2022. Production cuts by numerous businesses and the inability to execute expansion plans have furthermore bleakened the outlook for capital formation and economic growth in 2022 and 2023.
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