Home News The war in Ukraine has resulted in many losers and few winners....

The war in Ukraine has resulted in many losers and few winners. No state gets rid of price increases and supply problems

48
0

As sanctions against Russia continue to escalate, a return to the pre-war situation seems illusory, even in the event of an early termination of the conflict.

In this context, Coface revised upwards the cost estimate to the world economy by about one percentage point in 2022. However, the consequences of the conflict will be felt especially from the second half of the year and will continue to manifest even after 2023. .

The political risk, which has increased significantly globally since the onset of the pandemic, is exacerbated by rising food and energy prices.

No region will be truly spared the economic consequences of this war, and after the successive shocks of 2020, the perception remains the same: the world has changed and nothing will be the same.

Europe in tension

Russia and Ukraine ‘s important roles in the production of many goods, together with fears of supply disruptions, have led to rising prices, which has led to a decline in disposable household income and therefore consumption. Volatility and uncertainty will also greatly affect companies’ investment decisions, as their financial situation is likely to deteriorate significantly as production costs increase.

In addition to the economies of Central and Eastern Europe, which have important economic ties with Russia, Western European countries are the most exposed because of their strong dependence on Russian fossil fuels. Germany and Italy, whose economies are most dependent on Russian gas, will be severely affected (a 1.6 pp negative impact on GDP growth). The impact is likely to be weaker, but still significant in the rest of Europe.

Inflationary effects push the Fed to act sooner than expected

Across the Atlantic, the impact on growth will be more modest due to trade and limited financial exposure to Russia and Ukraine. However, in the United States, the overall rate of inflation has reached its highest level in 41 years, driven by high food and energy prices. Excluding these items, monthly price growth has moderated, but is well above the US Federal Reserve’s 2% target, prompting the Fed to act sooner than expected.

After an initial Fed rate hike in March, most members of the Monetary Policy Committee have expressed support for a “neutral” rate by the end of 2022, estimated at 2 to 3 percent. This would be one of the most aggressive tightening cycles of the 1990s today and would help moderate US economic growth, hence the downward revision of the US GDP growth forecast for 2022 to 2.7%.

No region will be exempt from imported inflation and supply chain disruptions

Africa, with an estimated global net negative impact of 0.5 percentage points, is a perfect example of how the current situation is affecting emerging economies, with intensifying inflationary pressures and the beginning of tightening Fed policy, with an impact on capital flows.

Asia will not be spared the consequences of the war either, in addition to the economic slowdown in China caused by the Omicron variant. A prolonged conflict in Europe or a further escalation will have an estimated net negative impact of 0.5 points on GDP growth in 2022.

Latin America is another region vulnerable to tightening Fed policy, but it should benefit from rising commodity prices. The net effect of the war in the region – which we estimate at -0.1 percentage points – is still uncertain and may not be fully felt in the near future.

If you like this article, we look forward to joining the community of readers on our Facebook page, with a Like below:

Read:   The Bank of Russia is asking banks to keep financial data "secret."
Previous articleFrance becomes the first major European country to authorize the operations of the huge Binance cryptocurrency trading platform
Next articleUnknown things about Jill Biden. She fought for her husband