Ukraine-Russia War will have Macroeconomic Impact: S&P

Russia’s invasion of Ukraine shocked global markets, generated uncertainty for investors and is expected to lead to supply chain disruptions across the world, said S&P Global Ratings. The S&P explained the possible scenarios for the world economy as the conflict advances and tensions continue to rise, with uncertainty clearly dominating global markets.

“The invasion has, beyond the human cost of the conflict, roiled financial markets and driven oil prices higher—and there could be profound and protracted effects on macroeconomic prospects and credit conditions around the world,” reads an S&P Global Ratings press release. In its report, S&P assessed the effects of Russia’s invasion of Ukraine on global economies, the ramifications for financial markets and the potential impact on credit.

S&P’s list of concerns include energy supply disruptions or price shocks, particularly in the EU, which are linked to the region’s ability to diversify away from Russian gas. The rise in energy prices might also lead to sustained inflationary pressures on food and metals and drag down economic expansion particularly in emerging markets. A ratcheting up of cyber and counter cyber-attacks between Russia and adversaries is also expected, warns S&P. Meanwhile, risk repricing could drive up borrowing costs or limit funding access. The conflict might also lead to a migrant crisis in Eastern Europe as Ukrainians leave the country to avoid the war.

Equities markets around the world reacted strongly in the lead-up to the attack, with S&P forecasting that investors could demand an “uncertainty premium” of higher returns. The current baseline fell sharply, as geopolitical risks continue to surge from a macro perspective.

The impact of the conflict in Mexico is yet to be determined. However, the country will maintain diplomatic relations with Russia, said Minister of Foreign Affairs Marcelo Ebrard. Following the invasion, Russia's honorary consul in Quintana Roo Armina Wolpert resigned from her position arguing that she does not share the principles and values ​​of her government, as reported by MBN.

“Mexico does not accept that one country invades another. We will not waver in our call for de-escalation, diplomacy and dialogue; a diplomatic solution is the only way to avoid falling off the precipice that a war in the EU would entail,” said Mexican President Andrés Manuel López Obrador.