NEW YORK–(BUSINESS WIRE)–KBRA publishes research outlining the immediate impacts on credit risk of Russia’s recognition of the Donetsk and Lugansk People’s Republics (DLPR) and its invasion and subsequent military actions in Ukraine. At global macroeconomic and geostrategic levels, the conflict is exacerbating supply chain bottlenecks and holding back global growth; it increases inflationary pressures in the short term and puts increased pressure on monetary policy that is too hawkish in the face of transitory elements of inflation, which jeopardizes the still fragile economic recovery after the pandemic.
The international community’s response has so far been milder than the suggested threats and is still being deployed and coordinated. However, the situation remains fluid. Regarding the invasion, the impact on credit will depend on the duration of the conflict and its escalation. Add to that the prospect of the land grab spreading to geographic areas outside of Ukraine, as well as retaliation and the risk that it will turn into a more long-lasting crisis. More punitive sanctions, especially those that interfere with business transactions, payments and capital flows, would threaten to have a direct and significant negative impact on exposed credit ratings, which could immediately impact transactions secure airlines and planes and in certain corners of the energy market. Another risk channel comes from increased cybersecurity events. If they extended beyond the shores of Ukraine, it would further complicate performance and increase uncertainty.
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