NEW YORK–(BUSINESS WIRE)–#KBRA–KBRA releases research outlining the immediate impacts on credit risk from Russia’s recognition of the Donetsk and Luhansk People’s Republics (DLPR) and its subsequent invasion and military actions in Ukraine. On the global macro and geostrategic levels, the conflict exacerbates supply chain bottlenecks and dampens global growth; it heightens near-term inflationary pressures and exerts greater pressure on overly hawkish monetary policy in the face of transitory elements of inflation, which risks the still fragile economic recovery from the pandemic.
The response of the international community has so far been more benign than the threats suggested and is still being rolled out and coordinated. However, the situation remains fluid. In relation to the invasion, the impact on credit will depend on how long the conflict continues and how much it escalates. Add to this, the prospect of expanding the land grab to geographic areas outside of Ukraine, as well as retaliation and risk it develops into a more sustained crisis. More punitive sanctions, especially those that interfere with commercial transactions, payments, and the flow of capital would threaten to have a direct and meaningful negative impact on exposed credit ratings, which immediately may include impact to airline and secured aircraft transactions and some corners of the energy market. Another channel of risk comes from heightened cybersecurity events. Should they broaden beyond the shores of Ukraine, this would further complicate performance and increase uncertainties.
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