The war in Ukraine, which marks its one year anniversary on Friday, has had a profound impact on the emerging world. Ukraine’s economy has collapsed, while Russia’s has contracted too even though the imposition of sanctions has not been as severe as initially expected. For other EMs, the main impact has come through the surge in commodity prices. That has boosted export earnings for commodity producers. But it also meant that inflation has risen much further than we thought it would 12 months ago, forcing central banks to hike interest rates much more aggressively. A year on, some of these effects are beginning to unwind, but elevated inflation and high interest rates will nevertheless continue to drag on growth in many EMs over the coming quarters.
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