KUALA LUMPUR (March 23): The Russian invasion of Ukraine has fundamentally changed the geopolitical landscape—with economic consequences, said S&P Global Market Intelligence.

In a statement on Tuesday (March 22), the firm said its forecast of global real GDP growth in 2022 has been marked down to 3.3% from 4.1% in February.

S&P Global Market Intelligence executive director, global macroeconomics Sara Johnson said Russia’s invasion of Ukraine has triggered a global commodities shock that will further dislocate global supply chains, drive up prices, and slow economic growth—especially in Europe.

“Russia’s economy will suffer permanent losses through sanctions, an exodus of foreign businesses, and a new emphasis on energy security,” she said.

Johnson said Russia faces its deepest recession since the 1990s and diminished growth potential.

She said that in response to severe sanctions by western governments and a mass exodus of businesses, real GDP is projected to plummet 22% over the four quarters of 2022, reaching its lowest level since 2006.

“On an annual basis, output will fall 11.1% in 2022 and 3.7% in 2023, with sharp declines in fixed investment, private consumption, and exports,” she said.

Johnson said that among major economies, the eurozone is especially vulnerable to inflationary shocks emanating from the Russia-Ukraine conflict.

She said the forecast of 2022 real GDP growth is revised downward by 1.3 percentage points to 2.4%.

She said S&P Global Market Intelligence expects a contraction in real GDP in the second quarter of 2022.

She said growth is expected to resume in the third quarter as improving COVID-19 trends boost services activity.

Eurozone consumer price inflation is expected to surge from 2.6% in 2021 to 6.9% in 2022, prompting the European Central Bank to start raising its deposit facility rate in December.

Given the economic risks, withdrawal of policy stimulus will proceed at a gradual pace.

Johnson said China’s economic growth is likely to fall short of the 5.5% target in 2022.

She said the forecast of real GDP growth in 2022 is revised down slightly to 5.1%, reflecting the impacts of higher energy price inflation and slower growth in European export markets.

“While exports, fixed investment, and retail sales posted strong gains in the first two months of 2022, new outbreaks of COVID-19 variants could dampen industrial activity and consumer spending this spring.

“Lockdowns have been imposed in Shenzhen, Shanghai, Jilin, and Guangzhou.

“As needed, the government will increase fiscal and monetary stimulus measures to support growth,” she said.