By Rachel Savage

LONDON (Reuters – As the COVID-19 pandemic continues, prices have risen due to Russia’s conflict in Ukraine.

Fitch predicted that 25% to 30% of emerging market economies it rates would have double deficits, with a minimum of 7% in gross domestic product.

Russia’s February invasion of Ukraine sent prices for food, fuel, fertiliser, and other commodities soaring. Global interest rate rises have also increased volatility, increasing the difficulties of emerging markets still struggling to recover after the pandemic.

Fitch stated in the note that “Sizeable Twin Deficits” are set against a challenging financing background of slower global growth, rising US Federal Reserve Interest Rates, quantitative tightening and a strong US Dollar, increased risk aversion.

The report added, “The rise in food prices is contributing to social and financial pressures.”

Fitch acknowledged that the current balances of commodity exporters are increasing due to higher prices. However, Fitch said net commodity importers would “lose out” as they will not be able adjust quickly to the inflationary shock.

The agency stated that credit ratings had been on a decline this year with nine countries receiving a downgrade, compared to just one upgrade. It also said that 48% of emerging markets were rated below A grades.