BoA anticipates months of uncertainty, but worse scenarios possible
Strategists at Bank of America forecast "months" of uncertainty, tough sanctions and high energy prices as a result of the Russian invasion of Ukraine.
Trying to forecast the impact of the war in Ukraine was like "catching a falling knife", but the situation was clearly not a "temporary risk-off" event, they said.
In particular, they noted how there was no clear 'off-ramp' for Russia.
Uncertainty was so high and their uncertainty so low that they judged the most "realistic" approach to be to present a range of possible outcomes instead of specific projections.
Under the middle of those three scenarios, Russia would go into a deep recession and Europe would slow significantly.
The remainder of the global economy however would only slow "modestly".
In parallel, the US dollar was expected to strengthen further, alongside "some" upward pressure on interest rates and ongoing downward pressure on risk assets.
World gross domestic product was now expected to expand by 3.6% and 3.3% in 2022 and 2023, respectively.
That was down from their prior projections for GDP growth of 4.3% and 3.4%.
Euro area GDP was now seen growing by 2.8% and 1.7% in each of those two years, down from BoA's prior forecasts of 3.5% and 2.2%.
Chinese growth on the other hand would be unharmed with its economy set to grow by 4.8% in both years.
Under the same scenario, which they termed "ugly stalemate", Russia refused to leave Ukraine, current sanctions would stick and more added, including some on oil exports.
The sanctions would be in place indefinitely, but Moscow would find ways to circumvent some of them.
The average price for Brent oil would peak during the second quarter at $130 a barrel, but average $110 for the year and fall beneath $100 in 2023.