Moody's Corporation · NYSE:MCO
Moody's — Russia-Ukraine Webinar (March 2022)
34 slides from Moody's's conference presentation, Mar 9, 2022
Slide 1: Global Macroeconomic Impact of the Russian Invasion of Ukraine
Global Macroeconomic Impact of the Russian Invasion of Ukraine Mark Zandi, Gaurav Ganguly, Cris DeRItis, Ryan Sweet and Adam Kamins March 9, 2022
Slide 2: Agenda
Agenda 1. Current State of the Crisis 2. Macroeconomic Impacts 3. Considering the Scenarios 4. Russia & Ukraine: Economic Catastrophe 5. Europe: Meaningful Blow 6. U.S. and Regions: Modest Hit March 2022 2
Slide 3: Current State of the Crisis
1 Current State of the Crisis
Slide 4: A Growing Humanitarian Crisis in Europe
A Growing Humanitarian Crisis in Europe 185k 1.1m 1.8m 180k refugees 128k 83k 79k Sources: UNHCR, Moody’s Analytics March 2022 4
Slide 5: Sanctions Cripple the Russian Economy
Sanctions Cripple the Russian Economy % of reserves held in each country and monetary gold, as of Jun 2021 Gold China France Japan Only Russia’s reserves held Germany in China are accessible U.S. IMF/BIS U.K. Austria Canada Other 0 2 4 6 8 10 12 14 16 18 20 22 Sources: Central Bank of Russia, Moody’
Slide 6: Macroeconomic Impacts
2 Macroeconomic Impacts
Slide 7: Oil Prices Spike…
Oil Prices Spike… $ per barrel 150 Brent The long-run equilibrium price is $78 125 West Texas Intermediate per barrel for Brent and $75 per barrel for West Texas Intermediate. 100 75 50 Every $10 per barrel increase in oil 25 prices results in a 30-cent increase in a gallon of regular gasoline. 0 20
Slide 8: …As It Is Unclear Where the Oil Will Come From
…As It Is Unclear Where the Oil Will Come From Change in global oil supply, ths of bpd 6,000 4,000 2,000 0 -2,000 Other Non-OPEC Other OPEC -4,000 Iran, Venezuela, Libya Saudi Arabia -6,000 Russia U.S. Total Supply -8,000 20 21 22, Feb baseline 22, Mar baseline Sources: IEA, Moody’s Analytics March
Slide 9: Agricultural Prices Surge…
Agricultural Prices Surge… Jan 1, 2022=100 180 160 Wheat Soy 140 Corn 120 100 80 60 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Sources: Chicago Mercantile Exchange, Moody’s Analytics March 2022 9
Slide 10: …As Do Metals Prices
…As Do Metals Prices Jan 1, 2022=100 240 220 $/lb Current High Low Avg Copper 200 Copper 4.6 4.86 0.6 2.5 Aluminum 180 Aluminum 1.6 1.8 4.2 0.9 Nickel 160 Nickel 21.8 24.6 2.0 7.1 140 120 100 80 60 40 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Sources: London Metals Exchange, Moo
Slide 11: More Stress for Already Stressed Global Supply Chains
More Stress for Already Stressed Global Supply Chains Supply-chain stress, 2019Q4=100 150 The global supply-chain stress index is a compilation of 140 14 indicators of bottlenecks in the supply chain. 130 Includes indicators such as supplier delivery index from regional manufacturing surveys to job
Slide 12: Inflation Expectations Are Uncomfortably High
Inflation Expectations Are Uncomfortably High U.S. inflation expectation, % 3.5 5-yr, 5-yr Forward 3.0 5-yr Breakeven 2.5 2.0 1.5 1.0 5-yr, 5-yr forwards are investors’ expectations for CPI inflation 5 yrs from now for the subsequent 5-yr period. 5-yr 0.5 breakeven measures the difference between no
Slide 13: Stock Prices Are Fragile
Stock Prices Are Fragile S&P 500 stock index 5,000 Stock prices are down approximately 4,500 13% from their all-time high at the beginning of the year. This is a loss 4,000 of $7 trillion in market cap… 3,500 …although much of this is due to 3,000 investors discounting a more aggressive tightening i
Slide 14: Considering the Scenarios
3 Considering the Scenarios
Slide 15: Russian Invasion of Ukraine Scenarios
Russian Invasion of Ukraine Scenarios March 2022 Baseline Limited Disruptions • Russia occupies much of Ukraine but does not • Russia occupies Ukraine and military tensions venture outside of the country. Military tensions continue through the end of next year. Severe abate by this time next year. s
Slide 16: Russian Invasion Hits the Global Economy Hard…
Russian Invasion Hits the Global Economy Hard… Change in 2022 real GDP growth, ppt, baseline scenario ≤ -15 -15 > & ≤ -0.5 -0.5 > & < 0 ≥0 no data Sources: National Accounts of Various Countries, Moody’s Analytics March 2022 16
Slide 17: …And Harder in Some Scenarios
…And Harder in Some Scenarios Global real GDP growth, % change yr ago 5 4 3 March Baseline Real GDP Growth 2022 2023 2 February baseline 4.0 3.5 February Baseline March baseline 3.4 3.6 1 Lengthy Conflict Limited Disruption 2.7 2.5 Limited Disruption Lengthy Conflict 2.0 2.0 0 22 23 24 25 Sources: G
Slide 18: Russia & Ukraine: Economic Catastrophe
4 Russia & Ukraine: Economic Catastrophe
Slide 19: Russia's Economy Is Severely Diminished
Russia’s Economy Is Severely Diminished Russian real GDP growth, % change yr ago 20 10 0 -10 Real GDP Growth 2022 2023 March Baseline -20 February baseline 3.0 2.3 February Baseline March baseline -13.5 -0.1 -30 Lengthy Conflict Limited Disruption -18.3 -5.9 Limited Disruption Lengthy Conflict -24.0
Slide 20: Europe: Meaningful Blow
5 Europe: Meaningful Blow
Slide 21: European Equity Prices Are Very Vulnerable
European Equity Prices Are Very Vulnerable DAX stock index 17,000 A number of European stock markets are 16,000 down between 15% and 20% from their 15,000 all-time high at the beginning of the year… 14,000 13,000 12,000 11,000 …while some of the decline reflected global softness at the start of the
Slide 22: Central Europe Relies on Russian Trade
Central Europe Relies on Russian Trade Total trade with Russia, % of GDP Lithuania Bulgaria Estonia Finland Latvia Exports Slovakia Hungary Imports Poland Netherlands Romania Belgium Slovenia Germany Sweden Czechia Italy Denmark Austria France Spain U.K. 0 2 4 6 8 10 12 Sources: Eurostat, Moody’s An
Slide 23: Financial Links Across Europe Are More Limited
Financial Links Across Europe Are More Limited $ bil 70 60 Claims on Russian counterparties 50 Other potential exposures 40 30 20 10 0 Italy France Austria U.K. Germany Switzerland Sources: BIS, Moody’s Analytics March 2022 23
Slide 24: Euro Zone GDP Immediately Weaker
Euro Zone GDP Immediately Weaker Euro Zone real GDP growth, % change yr ago 7 6 March Baseline Real GDP Growth 2022 2023 February Baseline February Baseline 4.0 2.9 5 Lengthy Conflict March Baseline 3.4 2.6 Limited Disruption 2.2 2.0 4 Limited Disruption Lengthy Conflict 1.5 1.3 3 2 1 0 -1 22 23 24
Slide 25: Euro Zone Inflation Outlook Deteriorates
Euro Zone Inflation Outlook Deteriorates Harmonized CPI, year-over-year % change 10 9 March Base 8 February Base 7 6 Lengthy Conflict 5 Limited Disruption 4 3 2 1 0 21 22 23 24 25 Source: Moody’s Analytics March 2022 25
Slide 26: U.S. and Regions: Modest Hit
6 U.S. and Regions: Modest Hit
Slide 27: U.S. Economy Takes a Modest Hit…
U.S. Economy Takes a Modest Hit… U.S. real GDP growth, % change year ago 5 March Baseline February Baseline Lengthy Conflict Limited Disruption 4 3 Real GDP Growth 2022 2023 2 February baseline 3.7 3.0 March baseline 3.5 3.0 1 Limited Disruption 2.8 2.5 Lengthy Conflict 2.0 2.6 0 '22 '23 '24 '25 Sou
Slide 28: …As Excess Household Saving Will Cushion the Blow
…As Excess Household Saving Will Cushion the Blow Cumulative household excess savings during pandemic, $ tril 3.5 $500 3.0 Spending on gas, Bil$ (R) $450 2.5 $400 Excess saving, 2.0 $350 Tril$ (L) 1.5 $300 1.0 $250 0.5 $200 0.0 $150 '20 Apr-20 Jul-20 Oct-20 '21 Apr-21 Jul-21 Oct-21 '22 Sources: BEA,
Slide 29: Investors Expect Aggressive, but Short, Tightening Cycle
Investors Expect Aggressive, but Short, Tightening Cycle Expected path of the target fed funds rate, % 3 Markets-current Markets-Mar 21 MA baseline 2 1 0 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr Sources: Bloomberg LP, Moody’s Analytics March 2022 29
Slide 30: Clear Differences Across the U.S…
Clear Differences Across the U.S… State regional GDP impact of Russian invasion of Ukraine Hurt most Hurt least Sources: BEA, Moody’s Analytics March 2022 30
Slide 31: …But the Economic Impacts Are Modest
…But the Economic Impacts Are Modest U.S. exports to Russia, 2019-20 avg, % of GDP >0.08 0.04 to <0.08 0.02 to <0.04 <0.02 Sources: Census Bureau, Moody’s Analytics March 2022 31
Slide 32: Sample of Moody's Analytics Economics offering
Sample of Moody’s Analytics Economics offering March 2022 32
Slide 33: Contact Us: Economics & Business Analytics Offices
Contact Us: Economics & Business Analytics Offices West Chester, EBA-HQ London Prague Singapore +1.610.235.5299 +44.20.7772.5454 +420.22.422.2929 +65.6511.4400 121 North Walnut Street, Suite 500 One Canada Square Washingtonova 17 6 Shenton Way West Chester PA 19380 Canary Wharf 110 00 Prague 1 #14-0
Slide 34: March 2022
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liabilit