The Russia-Ukraine conflict and subsequent sanctions have increased risks to the global economic outlook, with effects that will depend on the length and severity of the crisis, Moody’s Investors Service said in a report.
Europe’s recovery would be at risk if the military conflict escalates, according to VP-Senior Credit Officer at Moody’s, Kelvin Dalrymple.
“The rest of the world will be affected by commodity price shocks at a time when inflation is already high, and by financial repercussions from the sanctions against Russia and from financial market volatility,” he added.
Sanctions imposed by the US and its allies will have a direct impact on Russia and Belarus, and an indirect impact on foreign entities that do business with Russia, which would affect the global economy.
Rising prices for commodities from the region, such as oil, grains and metals, are increasing inflationary pressures, Moody’s said.
Metal prices climbed due to the crisis, as Russia is a big producer. Other countries that produce aluminum, platinum, copper and palladium will benefit from higher prices, while consumers will face higher costs as the increases are passed on to them, Moody’s said.
Russia and Ukraine are dominants in global production of neon gas, a component in semiconductor manufacturing. Thus, the Ukraine-Russian war could further exacerbate chip shortages and supply problems in the auto industry.