Repercussions Of The Russia-Ukraine War On The Global Economy

Repercussions Of The Russia-Ukraine War On The Global Economy
The incessant Russia-Ukraine war has been horrible for the global economy. The economic disruption emanates from three prominent sources: hike in commodities, supply chain imbalance, and economic sanctions.

The first global factor in the economy has been an unprecedented rise in commodity prices. From the start of this conflict, there has been a sporadic increment in prices of food staples and energy resources. This has been caused due to elimination of supply chains, erosion of infrastructure, and harsh sanctions. In the oil market, the widespread uncertainty due to stoppage of hydrocarbon elements from Russia has spawned a hike in oil and gas prices.

As per one estimate, the oil prices will remain 100$/bl and gas prices 50 percent more expensive if this conflict continues for a longer time.

This disruption has given birth to severe issues all over the world, especially in Europe. Russia and Ukraine export 60 percent of wheat and 28.9 percent of sunflower oil. Thus the war has caused food scarcity across the world.

The second prominent impact of this conflict has been a severe disruption in supply chains all over the globe. Due to sanctions, trade with Russia has been considered unprofitable. Most of the routes in Ukraine have been severely damaged. As most of the land trade routes between Europe and Asia have been severely terminated, this has impinged global trade carried out through these routes. The utmost party affected by this move has been China; due to its dependence on land routes for trade after the pandemic. Turkey has closed Bosporus transit and Ukraine has shut down commercial sea freights. This move has affected the grain supply in this whole region. On the other hand, the suspension of air routes in Europe for Russia and vice versa has further spoiled the situation.
The economic disruption emanates from three prominent sources: hike in commodities, supply chain imbalance, and economic sanctions.

Lastly, sanctions have crippled the growth of many developing states. World powers like China and the UK have been maintaining trade ties of billions of dollars with Russia and Ukraine. Now when everything is going through stagflation, the probability of economic recovery seems pessimistic. At the beginning of this war, US President Joe Biden announced severe sanctions on the Central Bank of Russia (CBR) and EU did the same. This move blocked a huge sum of USD643 billion to Russia. This left a huge impact on global currencies as well. After this decision, the dollar price surged all over the globe and other fragile currencies faced the wrath.

As per WTO’s Trade Forecast 2022-2023, this fiscal year would face a decline in economic growth from 4 percent to 3 percent. In the first of this fiscal year, the US economy lost a considerable share of economic recovery from the pandemic. The same is the case in Europe, Asia, and other regions.

The war in Ukraine has brought horrible economic jolts in many developing countries. Every industry has been negatively impacted. The automobile industry has observed shutting down of many small firms and businesses due to the unavailability of minerals from Russia.

The economic crisis has debilitated the fragile economy of Pakistan as well. The rising inflation, price hikes and depreciating rupee value are caused by the ongoing war.

It has been a dark year for developing countries when it comes to economic growth and activity. It is time for global leaders and organizations to put an end to this ongoing war as soon as possible. Otherwise, the long-term economic ramifications would be horrible for everyone.