The war in Europe is a triple whammy for emerging markets

EVEN BEFORE Russia invaded Ukraine, emerging markets were braced for a testing year. The conflict threatens to lengthen a list of woes that already included inflation, slowing growth, public finances strained by rising interest rates and lingering disruptions from covid-19. In a worst-case scenario, the fallout may even top all these concerns.The main transmission channel is unlikely to be Russia itself, whose economy is falling apart in the face of sanctions. Comparable in size to Australia’s or Brazil’s, the world’s 11th-largest economy is mid-weight and only loosely integrated with global supply chains. It is not a major market for exports. Steps taken by Western banks to reduce their exposure to Russia following its seizure of Crimea in 2014 also limit the risk of direct financial contagion. Instead the fallout for the emerging world will come in three indirect ways.