Although the war was confined to Ukrainian borders, its effects went far beyond and impacted the world economy. The disruption of German gas imports, for example, will lead to a contraction of the economy by 2 to 4%, in a recession that will be comparable to the Covid-19 crisis.
Internally, the Ukrainian economy has shrunk by 16%, a percentage that is expected to rise to 40 if the war continues, meaning that the country will have to rely on aid to survive, while Russia will be lucky if its policies manage to maintain a contraction of only 10%, especially after its exit from the global financial system and the withdrawal of Western companies from it, which its effects will not end even after the cease-fire.
Oil Prices
The world is unsettled on both energy supplies and prices, with gas prices recently fluctuating by as much as 70% in a single day.
While crude oil prices continued to rise in late April, fears of a global supply shortage due to the Ukraine war continued to grow, overcoming fears of falling demand from China, which has closed several provinces in light of Covid-19, with the increasing prospect of more Western countries joining the United States in imposing a ban on Russian oil. After Moscow cut off gas supplies to Poland and Bulgaria.
In addition, “OPEC +” maintained its cautious plan to increase production, despite pressure from the West, led by the United States, to try to lower prices.
Threatened goods
Gas and hydrocarbons, in general, are not the only ones affected by the war, however, Russia and Ukraine each account for 29% of global wheat exports and 60% of the world’s supply of sunflower oil, a key ingredient in many processed foods, according to JPMorgan. Standard & Poor’s Global.
This has led to a sharp increase in the cost of many food items, which had already reached their highest level in 60 years, according to the United Nations Food Price Index, as well as high prices for other commodities such as minerals and fertilizers.
In addition to the rise in food prices, the war also threatens the supply of some raw materials, such as palladium, a metal that is important for the automotive industry and from which Russia produces 40 percent of the world’s output.
Specter of world hunger
All of this is reflected in dozens of countries suffering from foreign debt. The World Bank has warned that the number of countries at immediate risk of debt problems has risen to 35 and that 12 countries may not be able to pay their debts by the end of the year.
When interest rates are raised, debt-ridden governments and businesses around the world will feel tangible effects. Rich countries may be the least affected, that they have the resources to support large segments of the workforce for several months in a row, if necessary.
Using Africa as an example, 35 of the continent’s 55 countries import wheat and other grains from Russia and Ukraine, and 22 countries import fertilizer from both.
So the Ukrainian-Russian war is having a serious impact on the world’s poor, mainly through the lack of supply of basic commodities and the closure of ports for export of basic commodities by countries to maintain their internal stability.
