Sunday, 25 September 2022

Russia-Ukraine crisis injects new risks into global economic outlook

5 min read

Moody’s Investors Service has published a report “Macroeconomics – Global: Russia-Ukraine crisis injects new risks into global economic outlook”.

Russia's (B3 RUR-) invasion of Ukraine (B3 RUR-) and the economic sanctions that the US (Aaa stable), European governments and other allies have subsequently imposed on Russia have increased risks to the global economic outlook.

In particular, further escalation of the Russia-Ukraine conflict would put Europe's economic recovery at risk. Heightened geopolitical risks are unambiguously negative for economic activity. The magnitude of the effects will depend on the length and severity of the crisis.

Key highlights:

  • Commodity price shocks will exacerbate inflationary pressures
  • Economic sanctions and financial market volatility have potential for broad global implications
  • Heightened security challenges create uncertainty
  • Growth implications will vary by region depending on transmission channel

Commodity price pressures will likely lead to currency depreciation and heightened inflation, through imported inflation, in some emerging market countries, which will tighten financial conditions and weaken growth. The rise in oil and food prices will limit household spending on other goods. The magnitude of the effects on individual countries will depend on whether they are net commodity importers or exporters. The biggest negative effect will be on importers such as China (A1 stable), Turkey (B2 negative), Korea (Aa2 stable), Japan (A1 stable), India (Baa3 stable) and Indonesia (Baa2 stable).

Re-disseminated by The Asian Banker from Moody's

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