Media Outreach

KPMG Global Economic Outlook H1 2022: Geopolitical uncertainty to lower growth prospects, increase inflationary pressures

SINGAPORE – Media OutReach – 6 April 2022 –

  • Russia-Ukraine war to lower global growth prospects and increase inflationary pressures
  • Central banks’ change in policy stance could add to markets’ volatility
  • On-going geopolitical uncertainties could see further disruptions to production and trade


The on-going conflict in Ukraine is set to lower global growth prospects and increase inflationary pressures across the world, according to the latest KPMG Global Economic Outlook.

The bi-annual report provides economic forecasts and analysis from the global organization’s team of economists in territories and regions throughout the world.

The latest edition, covering H1’2022, warns progress on global issues including public health and climate change has slowed as political and business leaders grapple with the broad implications of the war in Ukraine.

While Russia and Ukraine together represent a relatively small part of the world economy, both countries account for a large share of global energy exports, as well as exports of a range of metals, food staples and agricultural inputs. Together, Russia and Ukraine account for almost a third of global wheat exports.

Inflation on a high exacerbates central banks’ dilemma

The global economy emerged from the COVID-19 recession with higher public debt and as central banks raise interest rates, the servicing cost of sovereign debt also increases, making it particularly challenging for emerging countries whose debt is denominated in an appreciating US dollar. With policymakers and many businesses still reeling from the consequences of the pandemic, they are less ready to counter another significant economic shock.

Yael Selfin, Chief Economist at KPMG in the UK, said:

“As we continue to emerge from the restrictions imposed by the pandemic, one of the major concerns has been the rise in inflation across many parts of the world. The conflict between Russia and Ukraine has further intensified these pressures. Our analysis found that global inflation could average between 4.5%-7.7% this year and between 2.9%-4.3% in 2023, depending on how the crisis evolves. The change in central banks’ stance to address rising inflationary pressures, especially the Fed’s, could add volatility to markets as they adjust to a new policy direction. Going forward, the world economy will have to navigate a difficult period ahead under a cloud of geopolitical uncertainty. Businesses and households will be hoping for the best but should plan for potential ongoing disruptions and uncertainty.”

Global growth outlook

The outlook for the next two years will depend on how the conflict between Russia and Ukraine evolves. With so much uncertainty at present, KPMG’s Global Economic Outlook has developed three scenarios to examine the prospects for the world economy:

  • The main scenario assumes that world oil prices will be US$30 higher than their path prior to the escalation of the crisis, while gas prices will be 50% higher across Europe. It also incorporates a 5% rise in global food prices.
  • A more severe scenario looks at the potential impact with world oil prices US$40 higher together with a 100% rise in gas prices for Europe and 50% rise in gas prices for the rest of the world. This downside scenario also assumes a 10% rise in global food prices. Both scenarios incorporate a 23% rise in average metal prices and a 4% increase in the cost of agricultural inputs. They also include higher investment risk premia and additional government spending in Europe.
  • The report’s upside scenario looks at the possible outcome should the conflict resolve sooner than anticipated, with prices returning to early February levels and production and trade flows restored.

The report’s analysis found that global GDP growth could range between 3.3%-4% this year and between 2.5%-3.2% in 2023, depending on the scenario. Risks to KPMG’s forecast are currently skewed to the downside. It is possible to envisage that the conflict between Russia and Ukraine escalates beyond the report’s downside scenario, with cuts to energy supplies for example causing a significant disruption to production in parts of Europe. The COVID-19 pandemic is still causing shutdowns in major economies such as China, and a new wave could undo the progress in easing global supply chain blockages.

Paul Kent, Partner, Advisory at KPMG in Singapore, said:

“Many ASEAN countries, including Singapore, have signalled their intent to accelerate economic recovery as they move towards an endemic COVID-19 phase. However, as KPMG’s 2022 Global Economic Outlook report has indicated, growth will likely be tempered due to immediate challenges such as the impact of the Russia-Ukraine conflict, higher commodity prices, the latest Omicron wave in China and rising global interest rates. Meanwhile, inflation rates are trending upwards across the ASEAN region, though they remain relatively low by global standards. An exception is Singapore, with inflation currently at a nine-year high of 4 per cent. All eyes will be on the Singapore government’s delicate dance in tackling the rising costs for households and businesses, while ensuring that the economy remains competitive.”

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ASEAN growth outlook

Inflation is picking up across the ASEAN region in part driven by the easing of Monetary Policy during the pandemic. But unlike other parts of the world, momentum in prices is still relatively low – consumer price inflation in Indonesia, Malaysia, Thailand and Vietnam is currently sitting between 2% and 3%. Fiscal supports through the pandemic were generally smaller, resulting in a slower recovery in domestic demand and more muted local inflationary pressures. However, Singapore – where government support has been more significant – is an exception, with inflation currently at a high of 4%, not seen since 2013.

The recent rises in food and fuel prices will impact the region. A significant portion of wheat imports (to Indonesia and Philippines in particular) are sourced from Russia and Ukraine. Additionally, agriculture in the region is also heavily reliant on Russia and Belarus for potassic fertiliser. The adverse impacts of higher fuel prices are, however, partially offset in commodity-producing economies such as Indonesia and Malaysia through higher government revenues.

The Russian-Ukrainian conflict is also set to disrupt manufacturing supply chains, as a result of shortages in key inputs such as neon and semi-finished iron and steel, which are essential for the production of chips (neon) and cars, machinery and electronics (steel).

In some countries, such as Indonesia and Singapore, attention has started to shift towards fiscal consolidation with the announcement of tax increases as initial signs of economic recovery emerge. This will slow growth momentum going through H2 2022 and 2023, as will the exhausting of the easy wins from re-opening, which will take the pace of growth in many countries back towards long-run trend rates.

Gary Reader, Global Head of Clients and Markets at KPMG, commented:

“Before the outbreak of war in Ukraine, different territories and regions were at different stages of their post-COVID-19 economic recovery, and that is reflected in the analysis from our Chief Economists. But, while GDP forecasting varies, there are a number of clear, consistent themes and threats facing the planet. Armed conflict may currently be restricted to Eastern Europe, but it’s already having far-reaching consequences for all nations.

“Supply chain issues have moved from a post-covid issue to a major immediate threat, with potential shortages in natural gas, metals and grains, among many others. While shortages will impact every territory, we anticipate a disproportionate impact on some of the world’s poorest places and people, compounding long-term challenges for the planet’s collective recovery. Meanwhile, inflation looks set to become a major theme for everyone, raising the threat of a worldwide cost-of-living crisis. Economic forecasting is not a perfect science, but what KPMG’s Global Economic Outlook does do is shine a light on the path ahead, providing a degree of guidance in an increasingly difficult journey.”

Read and download KPMG’s Global Economic Outlook report here.

About KPMG’s Global Economic Outlook

KPMG’s Global Economic Outlook provides bi-annual economic forecasts, produced by macroeconomics teams across KPMG’s global network using a suite of external and in-house models capturing the main inter-relationships in the world economy. As with all forecasts, these are subject to considerable uncertainty and the outturn may differ significantly.

About KPMG International

KPMG is a global organization of independent professional services firms providing Audit, Tax and Advisory services. KPMG is the brand under which the member firms of KPMG International Limited (“KPMG International”) operate and provide professional services. “KPMG” is used to refer to individual member firms within the KPMG organization or to one or more member firms collectively.

KPMG firms operate in 145 countries and territories with more than 236,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities.

KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.


The issuer is solely responsible for the content of this announcement.

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