Naseebullah Khan
World economy which was harshly hit by Covid_19 is again facing jolts because of the ongoing armed conflict between Russia and Ukraine. Surge in Crude oil and Gas prices and shortage of Wheat and other food commodities alongwith other items have affected the world market severly.Russia and Ukraine are two gigantic producers of Wheat. Both Countries provide 40 percent Wheat to the world. 50 percent countries in the world rely on the wheat of these states. Both countries fulfills 50 percent Wheat requirement of 26 counties. After the eruption of war, the supply chain of Wheat has stopped that has resulted in wheat shrotage, increase in food prices and Wheat price hike throughout the world. The FAO in its 8 April 2022 statement said that currently food prices are 34 percent higher since the FAO started measuring.Russia provides 1/5 world fertilizers. While Ukraine contributes 50 percent of sunflower oil supply (first biggest in theworld), 10 percent of grain supply, and 13 percent of Corn supply. Because of the war 30 percent of agriculture land of Ukraine has affected. Russia is among top five producers of steel, nickel and aluminum. Whereas, Ukraine is amongst the top ten producers for sugar beet, barley, soya and rapeseed. Owing to the war, supply chain has disrupted with the blockage of the Black Sea_ which has made Global market volatile. These hurdles have brought world economy on a stage of recession. Europe is the most impacted region vulnerable to the current war. Russia is world second biggest producer of gas and third biggest producer of Oil suppliers. The EU imports 25 percent Gas, and 45 percent crude Oil from Russia. If Russia stops Gas supply to EU, according to the INF, 6 percent of the GDP will reduce. Germany, Italy or some countries in the Central and Eastern European region who are dependent on Russian natural gas have been facing serious economic meltdown with special reference to the hurdles that have created for industrial sector. After the reduction of Gas supply from Russia, on July 26, European Union announced an emergency plan of 15 percent reduction in use of Gas to curb its demand. This will ultimately impact production and industrial sector. The fears are that this move could could further increase the prices of commodities, inflation, and unemployment. At current, according to the IMF, Russia has already stopped 60 percent Gas supply to Europe. The United States and Europe,s toughest sanctions on Russia in response have sent the oil prices to a seven-year high level. Brent oil prices reached to 125 USD per barrel for the first time since 2014, whereby Europe’s TTF gas prices increased at a record EUR 192 on 4 March. That has further resulted in price hike throughout the world. The OECD slashed its outlook for global growth this year to 3% from the 4.5%. It predicted in December and doubled its inflation projection to nearly 9% for its 38 member countries. In 2023, it expects growth to slow to 2.8%. While, the IMF on July 26, said the due to the Russia_Ukraine war, global gdp growth will be 2.9 percent from 3.2%. Coface forecasts a deep recession of _7.5% for the Russian economy in 2022 and downgraded Russia’s risk assessment. It must be in mind that, owing to the current war and sanction of the USA andz the EU, Russia has defaulted. As far as war,s impact on Ukraine is concerned, a report of April 2022 of World Bank says, Russian Invasion to Shrink Ukraine Economy by 45 Percent this Year World bank. The World bank further said that the emerging market and developing countries in the Europe and Central Asia region expected to bear the brunt. The region’s economy is now forecast to shrink by 4.1 percent this year, compared with the pre-war forecast of 3 percent growth. Raising of interest rates by the US and other countries, global slowdown of economicgrowth, surging inflation and debt, and a spike in poverty levels will certainly affect world economy alongside low-income economies negatively. While, the deep humanitarian crisis and post war reconstruction of Ukrain will further have negative implications.Concludingly, the global economy had not stabled from the shocks of Covid_19 when the Russia_ Ukraine erupted and provided fuel to the already pathetic global economic outlook. It has been 5 months of the war that has resulted in increase in Fuel and Gas prices, shortage of Wheat, and inflation. The economists are fearing more ecnomic meltdown throughout the world with special reference to Central Asian countries, Europe, and low income countries in future.
