BusinessWorld

The Global Economic Impact of the Russia-Ukraine Conflict: One Year Later

Story Highlights
  • Impact on Emerging Economies
  • Impact on Developed Economies
  • Impact on Businesses

One year after Russia’s invasion of Ukraine, the global economy still feels the war’s consequences. The grain, fertilizer, and energy supply shortage has led to higher inflation and economic uncertainty worldwide. However, the impact of the war has been more severe on emerging economies, while the developed countries have proved to be surprisingly resilient.

Impact on Emerging Economies

The pain has been more severe in emerging economies. Countries like Egypt, where nearly a third of the population lives in poverty, have been struggling for years to feed their population. However, with the onset of the Russia-Ukraine conflict, it has become even more challenging for these countries to access basic goods. The disruption of the supply chain of wheat, barley, and cooking oil from Ukraine and Russia has caused major global suppliers for Africa, the Middle East, and parts of Asia to suffer food insecurity.

In Nigeria, for instance, the average food prices skyrocketed by 37% last year. The price of flour has doubled, causing bread prices to double in some places. At least 40% of bakeries in the Nigerian capital, Abuja, have shut down, unable to cope with the increase in flour prices.

Impact on Developed Economies

In developed countries like the United States and other wealthy countries, the surge in consumer prices has eased. This has buoyed hopes that the U.S. Federal Reserve inflation fighters will relent on interest rate increases that have threatened to tip the world’s biggest economy into recession and sent other currencies tumbling against the dollar.

Good fortune has also helped, with a warmer-than-usual winter lowering natural gas prices and limiting the damage from an energy crisis after Russia largely cut off gas to Europe. Oil and gas prices were high enough to cushion the impact on the energy-exporting Russian economy. Nevertheless, natural gas prices in Europe are three times what they were before Russia started massing troops on Ukraine’s border.

Impact on Businesses

The impact of the Russia-Ukraine conflict has not only been limited to individuals but has also affected businesses worldwide. In Europe, the cost of natural gas has skyrocketed, leading to higher energy bills for businesses. 

In Spain, the government is spending 300 million euros ($320 million) to help farmers acquire fertilizer, the price of which has doubled since the war in Ukraine. Farmers need fertilizer to grow crops, and with the current price increase, it has become challenging to grow crops to meet the market’s demands.

The Russia-Ukraine conflict has had far-reaching consequences for both individuals and businesses worldwide. Emerging economies are the hardest hit, with people struggling to afford necessities like food and shelter. Developed countries have been able to cope with the impact, although natural gas costs remain high. It is crucial to continue efforts to support affected countries as they experience the adverse effects of the war.

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