Global economic growth to suffer due to invasion of Ukraine: Moody's

Moody’s has lowered its baseline growth forecasts to capture these shifts in the global economic environment, it recently said in a note.

It views the global expansion as dented, but not derailed, and expects the G-20 economies to collectively expand by 3.6 per cent in 2022 compared with 4.3 per cent envisioned in its February outlook.

Growth will further slow to 3 per cent in 2023. Russia is the only G-20 economy that is projected to contract this year. Moody’s forecasts that its economy will shrink by 7 per cent this year and 3 per cent in 2023, down from projected growth of 2 per cent and 1.5 per cent respectively, before the invasion.

While it is clear that the military conflict will hurt economic activity and exacerbate inflation, a wide range of outcomes is possible, depending on the crisis' length and potential escalation, as well as policy responses and their effectiveness, Moody’s said.

In an alternative downside scenario to our baseline forecasts, in which oil and gas exports from Russia to Europe are cut, oil prices would surge and the global economy would be thrust into recession.

Other downside scenarios with very negative consequences for the global economy include potential widening of the Russia-Ukraine military conflict to other countries, it observed.

Developments that could dampen Moody’s global economic outlook include the potential for new COVID-19 waves, monetary policy missteps and social risks associated with high inflation.

ALCHEMPro News Desk (DS)