The tensions between Russia and Ukraine, while potentially increasing volatility, will not likely impact the global economy significantly, according to a report from Standish Mellon Asset Management.
Because Ukraine's nominal gross domestic product of $175 billion is a small part of the $73 trillion global economy, as well as Europe's reluctance to escalate the conflicts with Russia, the macroeconomic effect of the current conflict will likely be small, according to the “March Global Macro Views” report.
The firm's forecast for global GDP growth for 2014 remains at 3.5%, with an increase to 3.7% in 2015.
“It's going to have a limited impact,” said Thomas Higgins, Standish Mellon chief economist and co-author of the report, in a telephone interview. “Ukraine is a small economy, but for financial market volatility there's an obvious potential there, we've been looking at the various exposures in different regions and outside of Russia there's not too much there. There's some in Eastern Europe, but we don't anticipate this changing the track of global growth.”
The high visibility of the crisis in Ukraine, along with recent problems in Venezuela and Turkey, have created a certain skittishness regarding emerging markets as a whole, but Mr. Higgins said the continuing recovery in the U.S. and Europe should filter down to emerging markets.
“That's going to lead to a pickup in growth in the second half of the year and that's when the view of emerging markets is going to change,” Mr. Higgins said.
The full report is available on Standish's website.