By Yoruk Bahceli

(Reuters) – Global financial conditions are at their worst since May 2009. This is according to a Goldman Sachs index (NYSE:), widely followed. It could be a sign of a global economic slowdown.

The availability of financing in an economy is a measure of financial conditions. Central bankers closely monitor these areas, as they are strongly associated with future growth. The spending habits of households and businesses will be influenced by how tight or loose they are.

Goldman’s index rose by 130 basis points to 100.92 points on Thursday after Russia’s invasion of Ukraine.

Graphic: GS global financial conditions: https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkolojpx/KNQdg-global-financial-conditions-at-tightest-since-2009.png

Emerging market conditions reached their most tight since December 2008 with 102.47 points. This is a move of 230 bps since the invasion.

Russian conditions are the most restrictive ever recorded at 128.83 point, according to data. That’s up from 98 points at the beginning of February and is the tightest data since 2007.

Graphic: GS Russia financial conditions: https://fingfx.thomsonreuters.com/gfx/mkt/xmpjoewelvr/aWMrB-russian-financial-conditions-tightest-on-record%20(1).png

This is a worrying development in a world economy already at risk from rising commodity prices, supply chain disruptions and tightening.

Goldman Sachs is a financial services firm that uses metrics such equity swings, exchange rates and borrowing costs to calculate the most used financial conditions indicators. It has shown in the past a 100 basis-point tightening, which will crimp growth by 1 percentage point.

Richard McGuire of Rabobank is head for rates strategy. He expects tighter conditions.

He said that “Central banks tend to focus on growth rather than inflation so any hopes of conciliatory stance reflecting the fact of weakening demand are likely to be crushed.”

Thursday’s surprise announcement by the European Central Bank that it would end bond purchases for the third quarter of the year, opening the doors to rate rises was a shock. Investors had expected the bank to make no commitments given the impact the Ukraine crisis has had on the economy.

According to Moody’s ratings agency (NYSE:), commodity importers including India, Turkey and Korea may suffer the worst effects from price pressures resulting in sanctions against Russia.

McGuire explained that central banks can either tighten financial conditions by themselves or through eroded profit margins. This could lead to demand destruction.

He said that this can lead to further market selling, which is another way conditions could tighten.

None of Goldman’s metrics indicate relief. As investors evaluate the impact on profits, Goldman’s metrics show that the dollar has reached near its two-year peak and world stocks are down more than 10%.