S&P Global cut its 2022 GDP growth estimate for Russia by more than 11 percentage points to an 8.5% contraction, while its forecasts for Poland and Turkey were shaved by more than 1 percentage point, due to the effects of the war in Ukraine.
On its economic outlook for emerging markets for the next quarter, S&P Global said its base assumption was that “the conflict will have the most acute impact on commodity markets, supply chains, and investor and consumer confidence in the first and second quarters of 2022.”
The effects would lessening but linger in the rest of the year and beyond, it said.
S&P said countries in emerging Europe were the most exposed through trade, financing, and confidence channels, while many energy importers were also hit by the spike in prices.
S&P cut Poland's growth estimate by 1.4 percentage points to 3.6%, Turkey by 1.3 percentage points to 2.4% and South Africa by 0.5 percentage points to 1.9%. Russia's was cut to an 8.5% contraction was from a prior view of a 2.7% expansion.
“A combination of financial, trade, and technology sanctions has never been imposed on a large, globally integrated economy before, so we have little to go on to predict just how great the impact will be,” S&P said in a report.
On Poland, S&P said that even if exports to Russia had shrunk to 3% of the total, down from more than 5% before Russia's annexation of Crimea in 2014, manufacturing would suffer from supply disruptions and weaker demand from Europe.
It raised the inflation forecast for Poland to 8.9% in 2022 from 5.4% previously, and now see the reference rate reaching 5% by the end of this year and 5.5% by end-2023.
The downgrade to Turkey stems from dimming trade prospects and already slowing retail sales. Please download WikiFX for more forex news.
“Rising food and energy prices and the weaker currency will worsen an already dire inflation outlook,” S&P said, having estimated inflation at 55% this year.
Rising inflation risks pushed S&P to raise its forecast on the South African Reserve Bank key rate to 5% by year-end.
“Terms of trade have improved thanks to higher metal prices, although rising oil prices offset some of the gains, and we expect this improvement to support the South African rand in an environment of Fed tightening and market volatility,” S&P said.
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