S&P sees weaker growth and higher inflation in emerging markets

The macroeconomic outlook for emerging markets (EMs) in Europe, the Middle East, and Asia (EMEA) has changed considerably since end-November 2021 due to the Russia-Ukraine conflict, according to the new report by  S&P Global Ratings. Emerging Europe is highly exposed to the fallout from the conflict because of its geographical and economic proximity. The economic fallout from the conflict is interrupting strong growth momentum in Poland as well

“We have revised our GDP growth forecast for 2022 down to 3.6 percent from 5.0 percent in our November 2021 forecast. While exports to Russia as a share of total Polish exports make up only 3 percent, down from more than 5 percent before the 2014 conflict, the Polish manufacturing sector is closely integrated with European supply chains, and will therefore suffer from supply chain disruptions due to the conflict, as well as weaker demand from Europe. At the same time, the conflict-related confidence shock will weigh on private investment. There are notable uncertainties around the inflows of refugees and their integration into Poland's labor market, as well as outflows of workers from the construction sector,” the report reads.

S&P Global Ratings has significantly raised its inflation forecast to 8.9 percent in 2022 from 5.4 percent previously, reflecting upside inflation surprises, higher oil price assumptions, the weaker currency, looser fiscal policy, and an increase in the minimum wage. 

(WBJ)