WASHINGTON – Fears of an armed conflict in Ukraine after Russia sent troops into breakaway territories pose a new threat to the global economy already struggling to emerge from the coronavirus pandemic and dealing with record inflation, analysts warned on Tuesday.
European countries and the US are rolling out sanctions in response to the Kremlin’s actions, most of which are believed to target Russian banks and oligarchs. But they are expected to shake up energy markets and drive up prices for complementary commodities. The uncertainty comes after a year of supply chain bottlenecks that have disrupted trade flows around the world.
“If Russia’s attack on eastern Ukraine turns out to be a full-fledged invasion, it is likely that the global economy and America will suffer another supply shock.”
Mr. Brusuelas predicted that an “energy shock” could reduce US gross domestic product by 1% next year and push the inflation rate to 10%. That could increase the need for policy support to help lower income workers amid rising food, fuel and commodity prices.
Oil prices hit $100 a barrel on Tuesday, their highest in more than seven years, and gas futures in Europe jumped 13% after Russia sent troops into separatist territories in Ukraine. The escalating conflict could also lead to widening credit spreads and weigh on global stock prices, analysts say.
German Chancellor Olaf Scholz said on Tuesday that his country would stop certifying the Nord Stream 2 natural gas pipeline that would link it with Russia.
The consequences of additional sanctions will most likely hit European countries directly because they rely heavily on Russian natural gas.
“For the eurozone economy, the main threat from tensions between Ukraine and Russia is an inflation shock in which financial conditions tighten and energy prices rise,” said Claus Vistesen and Melanie Debono, economists at Pantheon Macroeconomics, wrote in a note to clients.
But the economic impact of the sanctions may be more muted than those caused by the sword.
Economists at Capital Economics note that Russia’s external debt and relationships with other advanced economies have weakened since the 2014 Crimean crisis, preventing the country’s economy from making any effort to cut it. from the global financial system. They predict that sanctions could most likely reduce Russia’s gross domestic product by about 1%.
Ukraine’s economy will most likely face the heaviest pain due to its fragile balance sheet and the need for foreign assistance.
Neil Shearing, Group Chief Economist at Capital Economics, said: “Given the obvious, the biggest economic impact will be on Ukraine. “Depending on the course of the conflict, this can be a challenge to coordinate.”
https://www.nytimes.com/2022/02/22/world/europe/sanctions-russia-ukraine.html Sanctions against Russia pose a new threat to a fragile global economy.