ECONOMIC CONSEQUENCES OF THE RUSSIA-UKRAINE CONFLICT

The Russia- Ukraine conflict has touched off fermentation in the fiscal requests, and drastically increased query about the recovery of the global frugality. Since our last publication, the world has shifted, so have the pitfalls.

• Advanced commodity prices consolidate the trouble of long- lasting high affectation which increases the pitfalls of stagflation and social uneasiness.
• Certain sectors Similar as automotive, transport or chemicals are more likely to suffer.
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• Coface forecasts a deep recession of7.5 for the Russian frugality in 2022 and downgraded Russia’s threat assessment to D( veritably high).
• European husbandry are most at threat at the time of jotting, Coface estimates at least1.5 chance point of fresh affectation in 2022, while GDP growth could be lowered by 1 chance point. Together with a complete cut of Russian natural gas force, this could bring at least 4 points of GDP, thereby leading EU GDP growth close to zero – more presumably in negative home – in 2022.
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THE CONFLICT THREATENS TO SQUEEZE ENERGY AND Goods requests farther

Russia is the world’s 3rd oil painting patron, the 2nd natural gas patron and among the top 5 directors of sword, nickel and aluminum. It's also the largest wheat exporter in the world( nearly 20 of global trade). On its side, Ukraine is a crucial patron of sludge( 6th largest), wheat( 7th), sunflowers( 1st), and is amongst the top ten directors for sugar beet, barley, soya and rapeseed.

On the day the irruption began, fiscal requests around the world fell sprucely, and the prices of oil painting, natural gas, essence and food goods surged. Following the rearmost developments, Brent oil painting prices traduced USD 100 per barrel for the first time since 2014( 125$/ b at the time of jotting) 

While high commodity prices were one of the pitfalls formerly linked as potentially disruptive to the recovery, the escalation of the conflict increases the liability that commodity prices will remain advanced for much longer. In turn, it intensifies the trouble of long- lasting high affectation, thereby adding the pitfalls of stagflation & social uneasiness in both advanced & arising countries.

AUTOMOTIVE, TRANSPORT, CHEMICALS ARE THE utmost VULNERABLE SECTORS

The extremity is obviously explosively impacting an formerly strained automotive sector due to colorful dearths and high commodity & raw material prices essence, semiconductors, cobalt, lithium, magnesium Ukrainian automotive manufactories force major carmakers in Western Europe some blazoned the cessation of manufactories in Europe while other shops around the world are formerly planning outages due to chip dearths.

Airlines and maritime freight companies will also suffer from advanced energy prices, airlines being the most at threat. First, energy is estimated to regard for about a third of their total costs. Second, European countries, the US and Canada have interdicted the access to their homes to Russian airlines and in turn, Russia has banned European and Canadian aircrafts from its airspace. This means advanced costs since airlines will have to take longer routes. ultimately, airlines have little room for rising costs, as they continue to face lower earnings due to the impact of the epidemic.

Rail freight will also be impacted European companies are interdicted to do business with Russian Railroads which will probably disrupt freight exertion between Asia and Europe, coursing though Russia.

We also anticipate feedstock for petrochemicals to be more precious, and the soaring prices of natural gas to impact the toxin requests, hence the whole agri- food assiduity.

DEEP RECESSION AHEAD FOR THE RUSSIAN Frugality

The Russian frugality will be in great difficulty in 2022, falling into deep recession. Coface’s streamlined GDP cast for 2022 daises at-7.5 after the recovery endured last time. This has lead us to downgrade the country's threat assessment from B( fairly high) to D( veritably high).

warrants specially targets major Russian banks, the Russian central bank's, the Russian autonomous debt, named Russian public officers & oligarchs, and the import control of high- tech factors to Russia. These measures put considerable downcast pressure on the Russian ruble, which has formerly declined, and will drive a swell in consumer price affectation.

Russia has erected up fairly strong financials a low position of public external debt, a intermittent current account fat, as well as substantial foreign reserves( app. USD 640 bn). still, the snap assessed by western depositary countries on the ultimate prevents the Russian central bank from planting them and reduces the effectiveness of the Russian response.

The Russian frugality could profit from advanced prices for goods, especially for its energy exports. still, EU countries blazoned their intention to limit their significances from Russia. In the artificial sector, confined access to Western- produced semiconductors, computers, telecommunications, robotization, and information security outfit will be dangerous, given the significance of these inputs in the Russian mining and manufacturing sectors.

EUROPEAN husbandry ARE THE utmost AT threat

Because of its dependence on Russian oil painting & natural gas, Europe appears to be the region most exposed to the consequences of this conflict. Replacing all Russian natural gas force to Europe is insolvable in the short to medium run and current price situations will have a significant effect on affectation. At the time of jotting, with the barrel of Brent trading above 125$ and natural gas futures suggesting prices durably over 150€/ Mwh, Coface estimates at least1.5 chance point of fresh affectation in 2022 which would erode ménage consumption and, together with the anticipated fall in business investment and exports, lower GDP growth by roughly one chance point.

While Germany, Italy or some countries in the Central and Eastern European region are more dependent on Russian natural gas, the trade interdependence of Eurozone countries suggests a general retardation.

On top of that, we estimate that a complete cut of Russian natural gas flows to Europe would raise the cost to 4 chance points in 2022, which would be bring periodic GDP growth close to zero, further presumably in negative home – depending on demand destruction operation.

NO REGION WILL BE SPARED in IMPORTED Affectation AND GLOBAL TRADE dislocations

In the rest of the world, the profitable consequences will be felt substantially through the rise in commodity prices, which will fuel formerly being inflationary pressures. As always when commodity prices soar, net importers of energy & food products will be particularly affected, with the spectre of major force dislocations in the event of an indeed lesser escalation of the conflict. The drop in demand from Europe will also hinder global trade.

In Asia- Pacific, the impact will be felt nearly incontinently through advanced import prices, particularly in energy prices, with numerous husbandry in the region being net energy importers.

As North American trade and fiscal links with Russia and Ukraine are fairly limited, the impact of the conflict will substantially be felt through the price channel and through the retardation of the European growth. Despite the prospect of slower profitable growth and advanced affectation, the recent geopolitical events aren't anticipated to ail financial policy in North America at this stage.