(Finance) – S&P Global Ratings sees a “significant risk” that the military conflict between Russia and Ukraine will continue, exacerbating the Europe’s energy crisiswhile interest rates in developed markets may be forced to “go up even steeper” than in the baseline to mitigate the rising inflationary pressures. This – explains S&P – could lead to a “deeper-than-expected recession in Europe and, to a lesser extent, in the United Stateswith a concomitant rise in unemployment from historically low levels”.
The negative scenario designed by S&P Global Ratings, in its report, considers three variables, growth, inflation and unemployment, for 2023-2025. According to S&P estimates, this scenario has about a one in three chance of happening.
The global economy is facing a double downside risk, on the one hand “persistent inflationary pressures, which require a stronger and longer monetary policy response from central banks” on the other “the dragging on of the war Russia -Ukraine, which exacerbates the ongoing energy crisis and increased risk aversion.”
There ECB – underlines S&P – would be forced to follow the Federal Reserve due to the depreciation of the euro against the US dollar, fueling imported inflation. This will lead to the Eurozone recession, with a GDP contraction by 1.3% in 2023 e Germany will suffer the greatest impact with a lower growth of 1.2 percentage points in 2023 and 90 basis points in 2024.
Inflation would be 1-2 percentage points higher than in the baseline scenario in 2023 and gradually decrease, remaining above the target until 2025.