Military conflict will be prolonged; companies seen fleeing from Russia: IIF


The Institute of International Finance (IIF) projects that the conflict between Russia and Ukraine will continue to drag on and lead to additional sanctions on oil and natural gas.

If he is correct with his new forecast, there will be additional pressure on energy prices that have been decisive in the global escalation of inflation since last year and so far this year.

The IIF stands by its estimate of an economic contraction for Russia of 15% this year and a further 3% in 2023.

According to the institute’s economic experts, this expected collapse of the Russian economy will leave GDP at 2007 levels.

They stressed that given the impact that the Russian economy is suffering from the series of sanctions that the West is applying, a brain and business drain is expected. Migration that will also have an impact on productivity and long-term growth for the country.

In a new analysis, IIF experts led by Deputy Chief Economist Elina Ribakova explained that given the nature of the situation as well as the “extremely fast” pace at which it is unfolding, “any forecast will inevitably be surrounded by a unusual amount of uncertainty.

However, they considered that “with the economic perspectives darkening, both in the short and in the medium and long terms, an extreme decrease in gross fixed capital formation is highly probable.”

IIF strategists estimated that the impact on economic activity will be largely captured in the figures for the second quarter of this year, as the sanctions began in late February.

“The base effects will lead to additional negative growth in all components of GDP in the third quarter and in terms of investment, it will materialize in the last quarter of this year,” they estimated.

Impacted Sectors

As the IIF economists put it, entrepreneurs in Russia’s energy and aviation sectors will be severely affected.

In both sectors, they anticipate the departure of foreign companies, which will have an impact on production, exports, capacities and the necessary investment to continue with the improvement of infrastructure.

They detailed that after the invasion of Ukraine, Airbus and Boeing canceled their maintenance and spare parts delivery contracts, which will affect them next year.

In a first report on “The Economic, Social Impact and the Political Implications of the War in Ukraine”, the organization’s experts disaggregated the impact on the economies and estimated that it will subtract one point from GDP in advanced economies and 1.5 from that of developing countries. emerging.

The GDP expectation for the emerging countries reflects the impact that the higher price of commodity imports will have, the increase in risk aversion and the deterioration in purchasing power.

Just last week, the Organization for Economic Co-operation and Development estimated the global impact of the conflict between Russia and Ukraine. They projected that it will subtract one point from GDP in advanced economies and 1.5 points from growth in emerging economies.

The GDP expectation for emerging countries reflects the impact that higher commodity prices will have, the increase in risk aversion and the deterioration in purchasing power.

The impact on economic activity will be largely captured in the figures for the second quarter of this year, as the sanctions began at the end of February.

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