Ukraine-Russia war turning businesses more pessimistic

MANILA, Philippines — Businesses around the world have turned more pessimistic about global growth prospects  this year due to Russia’s invasion of Ukraine,  according to a survey done by Oxford Economics.

Based on the results of its latest Global Risk Survey, Oxford Economics said business sentiment has deteriorated, adding that the war is now cited as the greatest global economic risk.

Oxford Economics said  84 percent of businesses have become more negative about global growth prospects over the past month.

In addition, more than half or 55 percent of businesses said they have become slightly more negative over the past month, with more than a quarter or 29 percent becoming significantly more negative.

“This represents the most widespread worsening of sentiment since we first asked this question in 2020, during the first coronavirus wave,”Oxford Economics said.

The survey conducted in March was participated by 165 businesses, including some of the world’s largest companies.

Oxford Economics said businesses have heavily revised down their expectations for global growth this year.

“The mean expectation has declined to 2.3 percent this month, well below both the 3.6 percent figure in our previous survey and our latest baseline forecast of 3.7 percent,” Oxford Economics said.

It said  businesses are also now attaching a sharply higher probability to tail risks, with respondents seeing a one-in-eight chance of global contraction this year, compared to the one-in-50 chance  in the January survey.

Similarly, respondents were  less positive over prospects for growth next year, with the mean expectation for 2023 falling to 2.7 percent from 3.1 percent in the January survey.

Meanwhile, results of the survey also showed that businesses  revised upwards their expectations for inflation this year, with the mean rising 1.5 percentage points to six  percent from 4.5 percent this year.

In addition, three-fifths of respondents expect supply-chain disruption to persist into 2023.

“Respondents appear more concerned about the impact of Russia’s war on the global economy than on their own businesses,”Oxford Economics said.

While around half or 51 percent of respondents expect the conflict to slightly lower activity in their business, only one-in-50 anticipate much lower activity, while two-fifths of businesses expect no impact or to even benefit from the conflict.

Moreover, respondents expect supply-chain disruption to persist, with around a third of businesses or 32 percent seeing disruption continuing into the second half of this year, while three-fifths of businesses don’t expect the disruption to end until 2023 or beyond.