The Russian invasion of Ukraine and the COVID-19 pandemic are adding unpredictability to state economic projections for the first quarter of this year, according to a UNC Charlotte professor who produces quarterly forecasts of the state economy.

North Carolina has seen strong recovery in its gross domestic product since the pandemic recession, with growth of 6.7% in 2021, according to John Connaughton, director of the North Carolina Economic Forecast. But he expects annual GDP growth to slow to 3.1% in 2022.

Connaughton, who is a professor of financial economics at UNC Charlotte’s Belk College of Business, presented his forecast Wednesday. The college’s quarterly prognosis has provided state economic data since 1981.

Because growth has been cooling, political and pandemic-related factors may have a significant effect, Connaughton said.

Coronavirus variants could bring back health-related restrictions that affect business activity and supply chains, he said. 

“The 2021 fourth quarter experience of a new variant should provide a cautionary note for economists looking forward,” Connaughton said in a news release for the forecast. “We have to realize that the COVID virus will do what it will do, which will have a periodic impact on future economic activity and the resurgence of inflation will present a drag on economic activity in 2022.”

The war in Ukraine also clouds the picture.

“Three issues creating uncertainty are too many for the economy to digest, particularly if one or more go south,” Connaughton said.

The Federal Reserve on Wednesday announced a quarter-point increase in the short-term interest rate in an effort to get a handle on inflation. The key rate has been near zero since the onset of the pandemic-related recession.

Connaughton said in his forecast that he sees increased risk of a new recession.

“I wouldn’t be surprised if we see a significant slowdown in late 2022 or early 2023,” he said.