A month after the beginning of war Ukraine, the world economy lives to the rhythm of the conflict and its consequences, from the rise in the prices of raw materials to the risk of the collateral effects of the sanctions on Russia.
These are some of its consequences of the Russian invasion on Ukraine:
Raw materials skyrocket
The conflict has triggered the prices of raw materials, starting with oil. A barrel of North Sea Brent was worth $90 in February and reached $139.13 on March 7, the highest level since the 2008 financial crisis. Since then, it has remained highly volatile.
Unlike the United States, the European Union, very limited by its dependence on Moscow, decided not to impose an embargo on Russian hydrocarbons for now, although it wants to become independent from Russian energy in 2027.
Breaks in supply chains have returned, especially in the automotive industry.
Threats to food security
“The war in Ukraine means famine in Africa,” warned the International Monetary Fund (IMF) and the United Nations warned of a “hurricane of famines.”
The current conflict involves two agricultural superpowers, Russia and Ukraine, which represent 30% of world wheat exports, so the rise in grain and oil prices became immediate.
The Food and Agriculture Organization of the United Nations (FAO) warns that if the war continues, between 8 and 13 million additional people could suffer from malnutrition worldwide.
At the moment no ships are leaving Ukraine and the spring planting could be 25-40% lower than usual.
Although the United States, India and Europe could substitute part of the missing wheat, the situation is more complex for sunflower oil and corn, of which Ukraine was the world’s first and fourth largest exporter, respectively.
It might interest you: Battling inflation: 11 tips to save money on gasoline bill
Sanctions and fear of a Russian default
Western sanctions have crippled parts of the Russian banking and financial system and caused the ruble to fall to 177 rubles per dollar on March 7. In addition, 300,000 million dollars of Russian reserves abroad were frozen.
These measures raised fears of a Russian default for the first time since 1998, which ultimately did not take place. The Moscow stock exchange was closed for almost three weeks.
The dilemma of west companies
Hundreds of Western companies have announced their withdrawal or at least the freezing of their activities in Russia, voluntarily or involuntarily, either for fear of sanctions, public opinion or political pressure.
Large companies such as the British oil company BP, Ikea, McDonald’s or Coca-Cola decided to freeze their activities in Russia, while others decided to continue their activity, arguing that they could not abandon their employees or deprive the population of basic products.
Brake to economic growth
The Organization for Economic Cooperation & Development (OECD) forecasts a reduction of one point in world economic growth due to the impact of the war in Ukraine whilst IMF plans to lower its forecast, currently 4.4% for 2022.
On March 18, the European Bank for Reconstruction & Development (EBRD), the IMF and the World Bank said they were “deeply concerned” about “slowing growth, trade disruptions” and a particularly serious impact on “the poorest and most vulnerable.”
Translation: César Heredia
It might interest you: