One year into the war in Ukraine

The first year of the war in Ukraine has had an enormous impact on the country’s economy and left it highly dependent on financing from allies. Russia’s economy has contracted too, but it weathered the impact of Western sanctions better than expected and benefited from sky-high commodity prices (although this is now changing). Countries with large trade ties with Russia were hit hard (e.g. the Baltic States) and some CEE countries fell into recession as inflation and interest rates surged. The effects of the war, including the energy crisis across Europe, are fading which has caused the outlook for this year to improve. But the war and Western sanctions will leave lasting scars across the region as Russia has become isolated from the West and CEE economies are overhauling their energy infrastructure.