Barclays says global recession unlikely, cuts growth expectations

March 24 (Reuters) – A global recession is unlikely despite the raging war in Ukraine, Barclays said on Thursday, even as the brokerage cut its 2022 growth forecast to 3.3% from 4.4% before the conflict.

Barclays, which also raised its global inflation expectations to 5.6% from 3.2%, said the main impact of the war is a supply side shock for both energy and food.

“Higher prices for energy and food will squeeze real wages, dragging consumption lower and complicating the growth/inflation trade-off for central banks,” Barclays economists wrote.

Russia’s invasion of Ukraine, which began on Feb. 24, has triggered a rally in commodities, with oil climbing over $139 per barrel earlier this month. It has also sparked fears of reducing stockpile of basic food materials, as well as shortage of fertilizers.

While the euro zone remains deeply hurt, Barclays expects minimal impact to growth in the United States and China.

The brokerage’s action comes after the International Monetary Fund (IMF) has warned that the deepening crisis in Ukraine could lead it to lower its global growth forecast. The IMF had projected global growth of 4.4% in January.