The global economy has largely recovered from the sharp downturn at the start of the pandemic, and GDP growth is expected to increase at a slower pace going forward. But the war in Ukraine, high inflation and difficult policy considerations now permeate the world.  

- The world economy has been hit by a new shock wave before the previous one has even settled down. The effects of the war in Ukraine so far are stoking the fires of inflation and stressing many central banks and several have already started to raise key interest rates. We likely have a completely new game plan ahead of us, but hopefully not a new world order, says Lena Sellgren, Chief Economist at Business Sweden.

Despite a downward revision because of the prevailing uncertainty, global GDP is expected to grow by 3.4 percent in 2022 and 3.2 percent in 2023. This is revealed by the year's first edition of the Global Business Climate report that Business Sweden presents today with a special in-depth section on Russia, which is increasingly isolated.

- Should the war continue for a longer period with additional sanctions and cut energy supplies to Europe, the effects on the global economy will be significantly more extensive, continues Lena Sellgren.

The direct effects of the war on the Swedish economy are currently judged to be relatively limited and confidence indicators are still at high levels. Sweden's economy continues to develop strongly, and GDP is expected to grow by 3.1 percent this year and 2.8 percent next year, compared to 4.6 percent in 2021. Despite new clouds of worry that weigh heavily on Europe, Swedish exports are expected to grow, especially to North America and Asia, where goods exports are expected to increase at a faster rate than to the rest of the world.

Europe's economy is expected to grow by 1.9 percent this year and 2.1 percent in 2023. The growth rate in North America is also slowing and is expected to amount to 3.2 percent this year and 2 percent in 2023. Unlike most parts of the world, inflationary pressure in Asia has been relatively moderate and GDP for the region is expected to grow by 4.5 percent this year and 4.7 percent next year.

- Our analysis is that the inflation shock in the world is transitory, but the outlook can change quickly. If inflation were to persist, the risk of stagflation increases, i.e. rising inflation and stagnant growth. It would hit the Swedish economy hard, which is highly dependent on demand from the outside world.

Read the report New shock waves in the world economy here.