The Day at a Glance | March 17 2022

The Top

*OECD warns about the economic impact of the war in Ukraine.

*The Bank of England increased interest rates by a third consecutive time, placing it on pre-pandemic levels (0.75%).

*Biden will meet Xi Jinping to keep pressuring and trying to stop the Russian invasión.

*Russia claims to have ordered the interest payment on bonds in dollars; creditors await receipt of the money.

*Several countries oppose sanctions on Russian fertilizers, including Brazil, because of the implications in costs of production and food prices.

Economic environment

OECD warns of lower growth due to war in Ukraine. The Organisation for Economic Co-operation and Development (OECD) issued this morning an update of its global growth expectations. Their estimates didn’t change against the previous published, but they dedicated some lines to reveal possible economic impacts of the conflict in Ukraine. According to the OECD, global growth could suffer a -1% reduction if the war is prolonged, which implies global GDP growth of 3.5% in 2022 against a base scenario of 4.5%. However, the most sensitive impact would be on global inflation because the conflict could add up to 250 bps to consumers’ inflation during the year. The causes for lower growth and higher inflation would be significant increases in raw materials prices; financial markets volatility; and a strong recession in Russia (due to financial and trade constraints that would affect its allies and creditors). The impact on commodity prices would be significant because Russia and Ukraine represent around 30% of world exports of wheat, 25% of Palladium, 23% of fertilizers, 15% of corn, 14% of nickel, and 12% of platinum. In addition, they are important energy producers. The OECD recommended keeping the tax aids focused in the most affected European regions and suggested that Central Banks should concéntrate on keeping inflation expectations anchored in the medium and long term, by complying with the monetary normalization plan announced prior to the conflict. Just the most directly affected countries should consider a pause to the monetary normalization process.