Days after Russia’s unprovoked invasion of Ukraine, Cal State Fullerton economists Anil Puri and Mira Farka provided in-depth perspective on the impact of the conflict on the business world.

The U.S. Economy – Insulated, But Still Exposed

“The U.S. is relatively insulated from this shock, though less than one would hope. The immediate and medium-term impact result is not just an upward march in inflation (via higher energy and food prices), it is also slower growth via jittery stock markets, a European slowdown and a difficult balancing act by the Federal Reserve in combating inflation without pushing the economy into the depths of a new recession. Such balancing acts rarely end up being perfectly executed,” the two reported in a March 1 CSUF News article.

Puri and Farka, who are co-directors of the Woods Center for Economic Analysis and Forecasting at CSUF, note that Russia and Ukraine combined make up only 3.3% of the world’s economy.

Yet Russia accounts for 42% of Europe’s gas imports and 37% of the total world trade of the European Union. Thus, U.S. allies in Western Europe are at greatest risk from the immediate economic fallout.

The Western world’s unified response to Russian aggression through economic sanctions is likely to cripple the Russian economy over time. But that doesn’t mean that Western powers will be unscathed.

“Though the sanctions so far have stayed clear of the energy sector, allowing for continued payments of gas and oil from Russia, some of these sanctions will have a dampening effect on the European economy given its trade ties with Russia. … The U.S. is more insulated from a direct adverse effect from these sanctions; second-order effects through financial markets and slower growth in Europe will hamper growth as long as the conflict continues.”

For More on Economic Forecasts

For more on the current economic climate, attend the April 22 Spring Economic Forecast featuring the in-depth commentary of Puri and Farka.