2022

APR
Implications of the War in Ukraine

Global financial conditions have tightened and downside risks to the economic outlook increased,
though no material systemic event affecting financial institutions or markets has materialized so far.

Transmission Channels of Foreign Banks and NBFIs’ Gross Claims Corporate Exodus from Russia
on Russia and Ukraine (Number of large firms, by type of exit)
the War in Ukraine (Billions of US dollars)
200
600 Foreign Domestic
528
160
450
120
312
300
80

Direct and indirect exposures 150 40

65 54
6 8
0 0
Banks - Russia Banks - Ukraine NBFIs - Russia Withdrawal Suspension Scaling No No change
back expansion

Commodity Price Volatility Surging Inflation Expectations Increasing

(Percent) (Inflation breakeven, percent)
15 Weekly percent change US 5 year Euro area 5 year
Post
10 4.0 Fed's hawkish turn invasion
+ virus concerns
5 3.0
Commodity price shock and 0
near-term inflation concerns 2.0
-5
1.0 Stabilization
-10 Sharp rise in H1
-15 0.0
Apr-21

Aug-21
Sep-21
Jan-21
Feb-21
Mar-21

May-21
Jun-21

Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Jul-21
Jan-62
Jan-67
Jan-72
Jan-77
Jan-82

Jan-92
Jan-97

Jan-07

Jan-17
Jan-22
Jan-87

Jan-02

Jan-12

Cross-Currency Basis Spreads Bid-Ask Spreads of High-Quality

Showing Some Strains Government Bonds the Widest since
(Three month, basis points) the Peak of the COVID-19 Crisis
(Basis points)
Euro Japanese yen British pound
20
0
US Treasury bonds German bunds
1.0
-20 Feb. 23
Funding and liquidity stress -40 0.8
-60
0.6
-80
-100 Feb. 23 0.4
-120
0.2
-140
-160 0.0
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22

Financial Conditions Tightening, Capital Outflows Increasing, with Risks

notably in Europe, the Middle East, and to the Downside
Asia (Standard deviations from the mean)
0.30 October 2021 GFSR
China
Asia ex. China Latest
Latin America 0.25
Risk-off scenario
Europe, Middle East, and Africa excl Russia and Ukraine
Probability of outflows

3 0.20
Financial conditions tightening Tightening Probability of
outflows
2 20%

and spillovers to emerging markets 1

0.15 30%
50%

0 0.10
Capital flows at risk
-1 1.7%
October 2021 0.05 2.3%
-2 2.5%
GFSR
-3 -
20 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 -4 -3 -2 -1 0 1 2 3 4 5
Percent of GDP

Russia’s Share in Global Production Limited Investment in Renewable Energy

(Percent) May Put the Transition at Risk
18 Net zero by 2050 (additional capacity)
Energy security 15 7,000
Accelerated case (additional capacity)
Actual
Total capacity in gigawatts

vs 12
6,000 Main case
5,000
energy transition 9 4,000
6
3,000
2,000
3 1,000
0 0
2010
11
12
13
14
15
16
17
18
19
20
21
26

Aluminum Copper Nickel Coal Oil Gas

Sources: Bank for International Settlements; Bloomberg Finance L.P.; BP, Statistical Review of World Energy, July 2021; Haver Analytics; JPMorgan Chase & Co.;
Morningstar; UN Comtrade; US Geological Survey; and IMF staff calculations.
Note: GFSR = Global Financial Stability Report; NBFIs = Nonbank financial intermediaries.

Challenging Trade-Offs amid Uncertain Geopolitics

❑ Central banks should act decisively to prevent inflation pressure from becoming entrenched and avoid
an unmooring of inflation expectations, while avoiding a disorderly tightening of financial conditions that
would jeopardize the post-pandemic economic recovery.
❑ Policy normalization in emerging markets should continue based on country-specific assessments of
inflation, economic outlook.
❑ Regulators should assess the implications of the elevated volatility in commodity markets on market
functioning and risk management.
❑ Policymakers should intensify their efforts to implement the 2021 United Nations Climate Change
Conference (COP26) road map while taking appropriate steps to address energy security concerns.