War shock and the economy : Some economic impacts of Russian aggression in Ukraine

Halmai, Péter (2023) War shock and the economy : Some economic impacts of Russian aggression in Ukraine. HUNGARIAN JOURNAL OF LEGAL STUDIES, 64 (4). pp. 545-559. ISSN 2498-5473

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Abstract

The main features of war shock are substantially different from those of the preceding COVID-19 shock. The EU economy is showing important elements of resilience. The existing structural forces and adaptive capacity of the EU economy are clear indications that it is capable of transformation and avoiding recession. The dynamics of the war is also crucial in terms of economic impacts. There are still many uncertainties about the future course of the war and its ramifications. The fundamental question is whether the war is heading in the direction of escalation or de-escalation. Unless the war spreads beyond Ukraine and the conventional means of warfare, its global economic consequences may be limited after the initial shock. New adjustment processes in the field of green and digital transition can be set in motion in parallel with the suffering and turmoil of war shock. New market players could emerge in the energy markets. The prolonged war continues to challenge the Ukrainian economy, but it can remain viable with massive external support. The Russian economy could suffer serious erosion, with its comparative advantage being wasted. There is a real threat of deglobalisation and the emergence of a fragmented world economy, but the counteracting factors appear to be much stronger. However, the prolonged war continues to pose major and unpredictable threats to the countries affected directly and indirectly, to Europe and to the world economy.

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