The raging conflict between Russia and Ukraine and the imposition of unprecedented levels of sanctions on Russia by the western nations, have cast a fresh uncertainty on the global growth outlook which was steadily recovering from the scars of the pandemic. The amplifying hostilities between the two nations have resulted in a sharp rise in price of certain commodities such as crude oil, gas, wheat, fertilizers, coal, edible oils etc. amidst the creation of global supply shock.
While Acuité expects the crude oil price to moderate with increased supplies from other OPEC+ countries, likely removal of Iran sanctions, US shale production growth along with gradual de-escalation in conflicts between Russia and Ukraine, they may remain higher than the pre-conflict levels as some sanctions and disruptions will linger. As of now, in base case Acuité expects crude oil price to average in the range of USD 95-97 pb in FY23.
Says Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research "From domestic standpoint, with India being a net importer of crude oil, the spike in energy prices is clearly a major macro-economic disruptor which will weigh on growth prospects and lead to a sharper rise in inflation as well as to a wider current account deficit".