Monitoring the economic damage of the crisis

The two nations involved in the crisis – Russia and Ukraine – are important in terms of population but not in economic terms. The sanctions put in place so far have been designed not to significantly harm the West economically, including exceptions to restrictions on the Society for Worldwide Interbank Financial Telecommunication (SWIFT) financial messaging system. ).

“We don’t know everything about how it might evolve. SWIFT sanctions could expand; action against Russian energy exports may intensify.

The macroeconomic context is characterized by very stimulating political parameters where risk appetite is already quite low. The ANZ Risk Appetite Index is as low as it has been at any time in the past decade, outside of April 2020.

Global activity is expected to remain fairly strong, inflationary pressures are significant and many central banks are lagging. The US Federal Reserve is expected to rise further in March, although 50 basis points is likely off the table at this time.

There are sectoral impacts that could be substantial for certain companies and individual asset prices. The crisis is very relevant if you trade or share supply chains with Russia or Ukraine or if you are exposed to energy or wheat prices. Within the strong dynamics of the global economy, there are many sectoral challenges. It certainly is.

We don’t know everything about how this might evolve. SWIFT sanctions could expand; action against Russian energy exports may intensify. There are third-order effects that will become apparent over time. But for the moment the main countries concerned are of modest size.


Economically, Asia is vulnerable to energy and food price increases, but the impacts on demand are limited.

From an asset market perspective, China, as a major economy, seems perhaps the best placed. The renminbi has not weakened at all since the start of the crisis.

There will likely be continued demand for China’s assets as its weight in major global benchmarks increases over time.


The crisis created another shock to commodity prices. Commodities have already been very strong due to excess stimulus during the pandemic, weak supply growth and climate change adjustments.

Oil, gas and wheat made headlines. But Russia is also one of the top five exporters of aluminium, nickel, palladium and iron ore.

Heightened geopolitical risks have had different impacts on the crude oil market. In cases where these risks have directly affected producers, the impact on prices has been substantial in the past.

Similar crises in the Middle East have seen oil soar. However, prices quickly returned these gains once the risk dissipated.

The potential supply disruption in the current situation is nearly double the level seen then. The likelihood of sanctions being imposed on Russian crude oil is relatively low, so any risk premium would be quickly wiped out if the risk diminished.


The geopolitical turmoil of the past decade, trade wars, steep increases in global military spending and now the crisis in Europe highlight a new normal when it comes to domestic and international politics around the world.

The forces driving these changes are substantial and entrenched: inequality, technology and great power rivalry as some economies rise and others decline.

Businesses and investors need to create redundancy against events that may not have happened often before, but are now happening with greater regularity.

We can’t rule things out anymore, thinking that this kind of thing will never happen. It is already happening.

Richard Yetsenga is Chief Economist at ANZ

This article originally appeared on ANZ Institutional perspectives website

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