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Credit Suisse halves 2022 European GDP forecast as Ukraine crisis deepens
The Credit Suisse logo is seen at the headquarters in downtown Milan March 9, 2016. — Reuters pic
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GENEVA, March 9 — Credit Suisse economists slashed their forecast for European growth today, expecting the region to expand just 1 per cent this year as the Ukraine crisis turbocharges commodities prices and disrupts supply chains.
The West’s moves to punish Russia for invading Ukraine have sent prices of crude oil and metals such as aluminium and nickel soaring, threatening to derail the nascent recovery from the coronavirus pandemic.
The brokerage group’s latest forecast, which also factors in a hit to the Russian GDP, is much lower than its previous estimate of 2 per cent-2.5 per cent.
Any fiscal response will have only a limited impact, the brokerage said.
“This time around (unlike the Eurozone crisis, Covid-19 pandemic or the Global Financial Crisis), Eurozone core inflation is above comfort levels, wage growth is back to target levels and the room for fiscal largesse post-pandemic is more limited,” Andrew Garthwaite wrote in a note.
The United States, however, seems more resilient, the economists said. US economic growth will probably fall by only 50-100 basis points to still be well above trend at about 3 per cent, Garthwaite estimated.
The European Union’s statistics office estimated in January that gross domestic product in the 19 countries sharing the euro expanded a quarterly 0.3 per cent in October-December 2021, slowing sharply from 2.3 per cent growth in the previous three months.
Garthwaite maintained his “benchmark” rating on global equities after their recent downgrade last month.
Yesterday, Citigroup analysts said that the Russia-Ukraine crisis will dent global growth as oil and commodity prices soar, but the hit will be somewhat cushioned by China’s push for economic stability and the strength of the US labor market. — Reuters