Total debt in frontier markets surged to a new record high of $3.5 trillion in 2021-some $500 billion above pre-pandemic levels. However, after reaching an all-time high in 2020, FM debt declined to 108% of GDP in 2021-helped by recovery and inflation.

Sanctions have hit the Russian economy hard, but more measures are likely coming. At this time, the discussion largely focuses on a potential embargo on energy exports. We show that a stop to natural gas imports would be much more difficult than to oil. This is due to both Europe’s gas supply composition as well as the mode of delivery. For Russia, an embargo would have a dramatic effect on overall activity and exports. The country could lose $250-300 bn in export receipts, depending on price dynamics.

The war has increased downside risks to growth, raised inflationary pressure, and would lead to wider current account and fiscal deficits. Worsening external financing conditions have encouraged capital outflows and raised the financing needs.

China's local government (LG) bonds have ballooned since 2018 as LGs were given ever greater bond quotas to finance deficit spending. The recent real estate slump exacerbated the risks as local governments depend heavily on land revenues. LGs are increasingly reliant on CG-LG transfers.

Surging commodity prices due to war should support activity this year. However, net energy importers could suffer, and forceful monetary policy tightening to rein in inflation will likely weigh on growth in most economies. The medium-term outlook remains bleak across major LatAm countries.

We expect the Russian economy to contract by 15% in 2022 due to the war in Ukraine. Sanctions play an important role but so does "self-sanctioning" of foreign companies. Domestic demand will fall sharply, while a collapse in imports will offset lower exports. Together with a decline of 3% in 2023, this will wipe out fifteen years of economic growth. However, the impact on medium- and long-term prospects is likely to be even more severe. "Brain drain" and low investment will weigh heavily on already-subdued potential growth.

The March 2022 edition of the Global Regulatory Update provides targeted updates on current workstreams and events.

The adverse effect of the latest surge in oil prices is likely to be much smaller than those arising from previous shocks. Advanced and emerging economies have substantially reduced the amount of oil used per unit of output.