The Institute of International Finance (IIF) says in a report that the Russian economy is expected to contract by 15% in 2022, with the risk of an even worse scenario.
In a report, the Washington-based entity formed by the world’s 500 largest banks notes that the sanctions suffered “dramatically tightened financial conditions” in the country.
The IIF assesses the risks of contagion to other emerging markets. According to the institute, this will depend on the course of the Russian war in Ukraine.
A severe escalation in the conflict would lead to the withdrawal of capital flows from emerging markets, while a more contained framework, which for the institute seems to be the most likely, would lead to a mixed scenario for these markets.
The IIF also comments that the recent advance in commodity prices should help emerging countries that export them, especially in Latin America.
Emerging European nations, on the other hand, are likely to suffer a strong impact through trade, while emerging markets that are importers of oil and wheat, such as Turkey and Egypt, are more at risk.
For the IIF, Russia could suffer more boycotts in the energy sector, which would greatly reduce its ability to import goods and services and deepen its recession.
The IIF points out, however, that widespread contagion from the Russian shock to emerging markets is not its most likely scenario.
Source: CNN Brasil
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