Mercy is a graduate of Business commerce in Logistics and Supply Chain management, who finds pleasure in writing and researching content.
Russia's Invassion of Ukraine And its effect to the world
Russia invasion of Ukraine is one of the most deadly war that has ever occured in the world, as much as it will affect a lot of humanitarian activity also economy will be affected greatly. We expect commodities to rise in prices, this is because the two countries are the major producers of commodities like food and oil and this war has caused inflation in the world with natural gas rising so high even price of food commodities like the price of wheat floor as 30% of global export is made up of Russia and Ukraine.
Increased food and fuel prices may intensify the danger of unrest in several countries, ranging from Sub-Saharan Africa and Latin America to the Caucasus and Central Asia, while food insecurity in parts of Africa and the Middle East is likely to worsen.
There will be three major channels via which the effects will be felt. One, increasing costs for commodities such as food and energy will drive inflation higher, diminishing the value of incomes and putting downward pressure on demand. Two, adjacent economies will face disruptions in commerce, supply chains, and remittances, as well as an unprecedented increase in refugee movements. Finally, lower company confidence and increased investor uncertainty will put downward pressure on asset values, tightening financial conditions and perhaps causing capital outflows from emerging markets.
Additional pressures will be felt by countries with direct trade, tourist, and financial exposure. Oil-importing economies would have larger budget and trade deficits, as well as increased inflation pressure, however certain exporters, such as those in the Middle East and Africa, may gain from higher prices.
The consequences of Russia's attack on Ukraine have already shook not just those countries, but also the region and the rest of the world, emphasizing the significance of a global safety net and regional agreements to cushion economies.
While some effects may take years to manifest, there are already clear signs that the war and the resulting increase in the cost of essential commodities will make it more difficult for policymakers in some countries to strike the delicate balance between containing inflation and supporting economic recovery.
Companies will struggle to establish financial channels through which to conduct trade with Russia, which will have an impact on supply chains and trade. Furthermore, the potential damage of key transportation infrastructure (particularly ports in Ukraine) may exacerbate current supply-chain concerns.Supply chains will be disrupted by three factors: issues with land-based routes, air traffic limitations, and the closure of maritime freight lines from Ukraine.
The conflict's economic impact will be felt mostly in Ukraine and Russia, both of which are expected to endure severe recessions this year. The war will also affect the eastern European countries that are most exposed to Russian commerce, such as Lithuania and Latvia. The EU will face an energy, supply-chain, and commerce shock elsewhere in Europe.
The immediate impact will be far less severe than the coronavirus-related economic shutdowns that occurred in 2020. With 146 million people and a massive nuclear arsenal, Russia is a transcontinental behemoth as well as a major source of the oil, gas, and raw materials that keep the world's factories operating. Russia, on the other hand, is a modest player in the global economy, compared to China, which is a manufacturing powerhouse with sophisticated supply lines.
With half the population and fewer natural resources, Italy boasts a twice-as-large economy. In comparison to Russia, Poland exports more items to the European Union.Of course, for those who rely on it, a closed gas station can be devastating. As a result, any economic harm will be unevenly distributed, with some countries and industries suffering greatly while others go unnoticed.
The crisis has prompted a rethinking of the global economy's structure, as well as concerns about self-sufficiency. The epidemic has already shown the drawbacks of long-distance supply chains that rely on lean manufacturing.
Now, Europe's reliance on Russian gas is prompting conversations about diversifying energy sources, perhaps further marginalizing Russia's role in the global economy.
The crisis in Ukraine poses a risk to the global economy, stifling growth and placing upward pressure on inflation, which is already high. Ukraine is not a big commercial partner for any major economy, although China, the United States, Germany, France, and Italy are among Russia's most important import partners.
The conflict has an impact on the global economy through numerous avenues. The economies of Ukraine and Russia are major suppliers of commodities such as titanium, palladium, wheat, and corn. Disruptions in the supply chain for essential commodities would keep prices high, aggravating the situation for consumers (including car, smartphone, and aircraft makers).
© 2022 Mercy Shamallah