After two years of the global pandemic, the world’s economy was just beginning to recover but now Russia’s invasion of Ukraine has apparently shattered hopes in this regard. The war could now have far-reaching economic consequences as financial markets tumble and oil and gas prices soar. The greatest risk facing global supply chains has shifted from the pandemic to the Russia-Ukraine military conflict and the geopolitical and economic uncertainties this has unleashed. Check out some opinions below on how international financial experts see the future of the world economic recovery.
Key Takeaways
- The Russia invasion of Ukraine is expected to have a domino effect on various supply chains as global companies sanction Russia by closing factories
- Various multinational companies have shut their factories and offices in Ukraine, halting the production and shipment of goods and components.
- The main economic consequences of the conflict mentioned by the financial experts are higher inflation, a fall in GDP, disruptions to supply chains and financial markets, and an exodus of Ukrainian refugees.
- Some experts suggest that the economic recovery registered recently will prevail despite the ongoing conflict;
“The economic and social impact of the conflict will be enormous. The global economy is not yet fully recovered from the shock of the pandemic. The medium- and long-term consequences will depend on the severity and intensity of the conflict. The implications of this war will be higher inflation, disruption to supply chains and financial markets, and an exodus of Ukrainian refugees. Russia and Ukraine are key suppliers of energy, metals, raw materials, food, and agricultural items. A temporary supply shortage of commodities will cause an immediate increase in prices and will be a major source of inflation. Russia and Ukraine account for roughly 30% of the world’s wheat exports. On the 5th of March after 10 days of the war, the wheat futures rose to $1145.0 per bushel, 35% higher compared to the 25th of February. WTI crude oil was around $115.7 per barrel up by 26%, and gasoline $3.515 a gallon, up by 22% in line with surging crude oil prices. Natural gas in Europe rose to €204.15 per megawatt-hour soaring by about 2.16 times more. Coal futures broke another record at $417.3 per ton, up by 75%. The conflict will have a strong impact on global supply chains. A reconfiguration of the global chain will affect the cost and productivity of business activity. Global energy and food security are under threat depending on how long the crisis continues. Higher fuel prices will cause higher food prices which in turn will affect food security. Fewer developing countries are more vulnerable to this threat because security reserves are at low levels. Russia’s invasion of Ukraine has undoubtedly significant repercussions for international transport. Ukrainian airspace is shut and there are sanctions on Russia. This will weaken tourism demand from the countries in conflict, and consequently will hit hard those countries with a reliance on tourism. In this geopolitical situation, investors will remain uncertain and volatility is expected both in real assets and across financial markets for the weeks and months ahead.”
“In the midst of the COVID pandemic, the world is economically recovering – a process which I believe will continue to go on in spite of the current Russian invasion of Ukraine. Indeed, after a week of a violent conflict, we face a certain halt on the financial markets because of the SWIFT and international trade and travel restrictions on Russia but in the long run, recovery will prevail. Our modern history demonstrates that after the Second World War, the economies of the democratic and free States have generally flourished. This was due to the newly established network of international cooperation which has been strengthened ever since. Our hope is that the current battlefield will soon end, but even if it develops into a full-scale war, the trend of economic recovery cannot be stopped.”
“Few folks recognize that the world economy post-pandemic has not fully recovered and continues to reverberate from ongoing instability, inflation, new consumer behavior, and changing business and industry dynamics. Moreover, our world economy continues to be buffeted from the effects of lockdowns, travel restrictions, social distancing, changing laws, climate change, and the increasing frustration of everyday people. On 24 February 2022, Russia launched a large-scale military invasion of Ukraine. I am writing this response one-week post-invasion. In the span of one short week, this war has affected global travel and energy prices and trade flows are undergoing major shifts, instability, and realignment. These changes are decreasing economic activity and decreasing productivity. Add global inflation to the mix and the answer is obvious: our global economy is under threat.”
“The pandemic has left the global economy with two critical points of vulnerability — high inflation and nervy financial markets. The aftershocks of the invasion could quickly worsen both. There’s a threat to growth too. Households are spending an ever-larger chunk of their incomes on fuel and heating and will have less cash for other goods and services. Plunging markets would add another drag, hitting wealth and confidence and making it harder for firms to tap into funds for investment. While there is much uncertainty about the political and human consequences of Russia’s attack on Ukraine, the world should also be prepared for severe economic ramifications. Europe will be first in the path of any economic storm, partly because of its greater dependence on Russian energy supplies but also because of its geographical proximity to war on its doorstep. In addition, defense budgets will rise in Europe and some other countries to reflect the increasingly dangerous global situation. This will not reduce GDP growth, but it will reduce people’s well-being because resources dedicated to defense are resources that cannot go towards consumption or investment in education, health care, or infrastructure. The humanitarian emergency will be added due to the movement of the population affected by the war, so all of these predict a very complicated economic situation.”
“It is indeed worth asking whether economic recovery is threatened by the Russian invasion of Ukraine. With the control of COVID-19, the economic recovery began to be felt but remained fragile. Russia’s intervention in Ukraine will, in my opinion, cause the economic recovery to regress or even stop because the eyes of the whole world are turned towards this conflict, the outcome of which is not yet known. Will it spread, get bogged down, or get worse? Either way, this conflict will impact economic and trade development. Development Aid has the merit of asking this question which is of interest not only to developing States but of course to all the consultants looking for a job. In order to limit the impact of the conflict on economic and commercial development, it seems useful to me to continue to work as you do, perhaps by using our skills as much as possible through working from home as far as possible, knowing that for the moment it will be very difficult to travel.”
See also: Is the EU ready for the Ukrainian refugees? | Experts’ Opinions
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