In its latest update, the firm cut its global growth forecast to 4%, down from 4.4%, and gave Russia’s invasion of Ukraine as the direct reason for this change.
Diana Mousina, an economist within the investment strategy and dynamic markets team at AMP, said: “While these two countries make up a small 3.5% of global GDP (in purchasing power parity terms) there is some negative flow-on effect to the larger (in GDP terms) surrounding European countries, especially Germany which is Russia’s third largest export market, through production impacts, falling consumer confidence and higher commodity prices.
“A drawn-out conflict that curtails Russian oil & gas supplies to Europe would mean that GDP would need to be revised down further from here. But hopefully the situation can be resolved soon or at least is contained. In the longer term, rebuilding after the war could have a positive impact on GDP growth.”
However, Mousina added that global GDP growth of 4% is “a solid and above-trend growth rate), while pointing out that the build-up of consumer savings over the pandemic, the further re-opening of global economies and international borders, and other factors supporting growth “remain intact”.
More locally, AMP also looked at the flooding across the east coast of Australia and how it would hit consumer spending, agricultural production and exports.
Mousina noted that past flooding has tended to cause a short-term spike in fruit and vegetable prices. The current floods are expected to add 0.2 percentage points to headline inflation in the March quarter, with the risk that this could also carry over into the second quarter.
She added: “There will also be a disruption to exports and we expect a 0.1 percentage point hit to March and June quarter GDP from lower spending and exports.
“But rebuilding later in 2022 will provide a boost to second half GDP growth so for the year as a whole we have not changed our expectation for GDP growth around 4.5%.”
