War intensifies inflationary shock

The outlook for this year was already challenging, as highlighted in previous editions of IBRE’s Macro Bulle- tin. Low GDP growth was expected, together with inflation above the top of the tolerance interval, 1.5 percentage points beyond the target of 3.5%. The situation was also uncertain, given the upcoming elections in October and the prospect of monetary tightening in the world’s major economies, especially the United States, which in general has a significant impact on emerging economies.

The war in Ukraine has further increased the uncertainties about international and domestic conditions going forward. One early effect of the conflict was steep growth in global prices of energy and agricultural commodi- ties. Russia is a leading producer and exporter of commodities, including oil, natural gas, wheat, corn and ferti- lizers. Because of the war, Western governments imposed sanctions, which further reduced the supply of these products and raised their prices. For example, Brent crude peaked at US$139 on March 7, given that Russia accounts for around 10% of global production and trade in this product.

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