According to a Moody’s team who analyzed, in a virtual meeting, the macroeconomic impact of the war in Eastern Europe, global economic growth is expected to fall to 3.4% this year or, in the worst case , at 2%, while the previous forecast, in February, was 4%.
This scenario envisages the possibility that Russia will occupy a large part of Ukraine and that military tensions will decrease within a year, that the Russian economy and financial system will be isolated from the rest of the world and that Russian oil exports be reduced to 1.5 million barrels a day.
If so, Moody’s estimates Russia’s economy will contract 13.5% this year, but the agency says a ‘long conflict’ could lead to a 24% drop, which would happen if it does. there was a full-scale invasion of Ukraine that would lead to tougher sanctions such as curtailing crude exports by up to 3.5 million barrels per day, causing major ‘turmoil’ in supply chains world.
The Eurozone is, in any case, suffering a “hard blow”, as it was optimistically expecting the recovery from the covid-19 crisis and there is now a “cloak of negativity” in the markets, after having lowered the expectation of GDP growth from 4% to 3.4% this year, and in the worst case to 1.5%.
The euro zone’s inflation outlook has “deteriorated” as it is “incredibly dependent” on Russian energy imports and the economy was already facing price pressure before the invasion, Moody’s reports.
In the less exposed United States, the agency calculates that the effect of the conflict will be “moderate” and the GDP forecast drops from 3.7% to 3.5% this year, largely because there are an “excess” of savings in families due to the time of the pandemic, which should “buffer” the sharp rise in energy prices.
According to the analysis, the commodity markets are very “destabilized” with regard to agricultural products such as wheat or corn, of which Russia and Ukraine are major exporters, which will affect above all the cost of living. in emerging countries.
Rising commodity prices will also impact the supply chain, which was already under pressure since the emergence of the Delta variant of the coronavirus, and “vulnerabilities” could arise in components such as nickel, aluminum or neon gas, used to make semiconductors.
On the positive side, analysts said the war and the resulting spike in fossil fuel prices could be an “opportunity for Europeans to come together and promote renewables at a faster pace”.
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