The macabre sun of 24 February shattered thousands of lives in Ukraine. The warmongering policies of Russian President Vladmir Putin wreaked havoc on every piece of Ukrainian land. In the garb of a special operation, the slaughter of the Ukrainians has been perpetrated blatantly.
The aftermath of this incessant war seems horrible in every spectrum. From social cohesion to the economic domain, the impacts have been global. When it comes to economic drawbacks at a global level, then the situation is unpalatable.
The world was recovering from the unfathomable economic injuries caused by the covid-19 pandemic, but this war has exacerbated the plight. Global trade and economic activity are facing multiple problems. The nature of these conundrums seems complicated and nebulous. This war has caused uncertainty in financial centres and global trade hubs. The economic disruption emanates from three prominent sources: hike in commodity prices, supply chain imbalance, and economic sanctions.
It has been a dark year for umpteen developing countries when it comes to economic growth and activity. Now 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
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 the prices of food staples and energy resources. This has been caused due to the elimination of supply chains, erosion of the infrastructure, and harsh sanctions.
In the oil market, the widespread uncertainty due to the stoppage of hydrocarbon elements from Russia has spawned a hike in oil and gas prices. In this scenario, as per one estimation, the oil prices will remain 100$/bl and gas prices 50 percent more expensive if this conflict continues for a longer time.
In most European countries, the gas supply from Russia is the main source of daily life usage. So this disruption has given birth to severe issues all over the world, especially in Europe. Russia and Ukraine globally export 60percent of wheat and 28.9 percent of sunflower. So this destruction of vital food supply all over the world has caused food scarcity.
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 limited, this has impinged the global trade carried out through these routes. The party most affected by this move has been China; due to its dependence on land routes for trade after the pandemic.
Turkey has closed the 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. Almost 35 percent of air freight will face this problem in the revival after the pandemic.
Third, the two-edged sword of sanctions has crippled the growth of many developing nations linked with Russia or Ukraine. World powers like China and the UK have been maintaining trade ties of billions of dollars with these countries. Now when everything is going through stagflation and economic stagnation, the probability of economic recovery seems pessimistic.
At the beginning of this war, US President Je Biden announced severe sanctions on the Central Bank of Russia (CBR), and the EU did the same. This move blocked a huge sum of $643 billion to Russia and halted its conversion into roubles. This made a huge impact on global currencies as well. After this decision, the price of the dollar surged all over the globe and other fragile currencies faced the connsequences.
As per WTO’s Trade Forecast 2022-2023, this fiscal year would face a sheer decline in economic growth from 4 percent to 3 percent. In the first quarter 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. This war in Ukraine has brought horrible economic jolts in many developing countries. Every industry has been negatively impacted. The automobile industry has seen the shutting down of many small firms and businesses due to the unavailability of minerals from Russia. More than 50 percent rise in the price of cars and other vehicles proves this gruesome reality. This economic crisis has debilitated the fragile economic activity of Pakistan as well. The rising inflation, price hikes and depreciating rupee value are caused by this ongoing war.
At the end, keeping in mind all these factors, this war would ravage the global economic activity. It has been a dark year for umpteen developing countries when it comes to economic growth and activity. Now 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.
