S&P Ratings Predicts 'Shallow Recession' in US if Global Woes Persist

WASHINGTON (Sputnik) - S&P Global Ratings said on Wednesday that it projects a "shallow recession" in the United States if the global economy continues to be impacted by the Ukraine-Russia conflict, the European energy crisis and increasing interest rates in developed countries.

"Considering increasing risks and the potential for materialization, we have developed a downside scenario... In the US, it would result in GDP [Gross Domestic Product] contracting by 0.3% in 2023, compared with a shallow recession in the first half of the year in our baseline, with marginal growth of 0.2% for the year," S&P Global Ratings said in a press release.

S&P Global Ratings Emerging Markets Head of Credit Research Jose Perez highlighted in the release that the risk is created by the prospect the Russia-Ukraine military conflict and Europe's energy crisis would drag on and the potential that interest rates in developed markets may have to rise even more sharply to mitigate broadening inflation pressures.

In Europe, this downside scenario would create high energy prices and rationing in the region, the release said.

"The European Central Bank would be forced to follow the Federal Reserve because of the depreciation of the euro against the US dollar, fueling imported inflation," the release said. "This will lead to eurozone recession, with GDP contracting by 1.3% in 2023 - and Germany suffering the largest impact."

S&P Global Ratings said there is a roughly one-in-three likelihood of these scenarios occurring in the United States and Europe.

On Tuesday, US President Joe Biden said he thinks there will not be a recession in the United States, but he added that if there is, it would be a "slight" one.