S&P Global Ratings lowered its real GDP growth forecasts for emerging markets (EMs) to 4 per cent in 2022 and 4.3 per cent in 2023 (from 4.8 per cent and 4.4 per cent, respectively).
Russia aside, the bulk of the downward revision to growth comes from EMs in Europe, while the impact on growth is more contained elsewhere.
Negative supply shocks from higher commodity prices and logistics costs will reinforce higher prices, the ratings agency added.
Although commodity producers will benefit from higher prices, consumer price inflation in the median EM will be 1.2 percentage points higher in 2022 compared with the November inflation forecast, emphasising the hit on households' purchasing power.
In its Emerging Markets Focus, the ratings agency said: "Broadening inflationary pressure means we now expect tighter monetary policy across most EMs despite the conflict weighing on economic activity, especially with the US Federal Reserve indicating a swifter policy tightening stance.
"A prolonged Russia-Ukraine conflict is a key downside risk for EMs. The concurrent risks of faster Fed tightening and negative investor sentiment due to the conflict may trigger financial market volatility, leading to weaker exchange rates and significantly higher yields.
"As most emerging market (EM) economies continue to recover from the Covid-19 pandemic, the Russia-Ukraine conflict and inflation risks now dominate the outlook. The circumstances surrounding geopolitical tensions continue to evolve quickly in unexpected ways, and the implications for global economies are highly uncertain. In the near term, the conflict is likely to weigh on economic activity for most parts of the emerging world and raise inflationary pressure broadly."
Fraser Lundie, head of fixed income – public markets at Federated Hermes, added: "With regards to developments related to the geopolitical conflict in Ukraine, the US imposed further measures, including a prohibition on new investment in Russia and the EU is also considering a fresh sanctions package. Worries over the Chinese economy growth slowdown as lockdowns remain in place in the country also resulted in weaker performance in emerging markets."