The Global Economic Impact of the Russia-Ukraine War
The prolonged Ukraine-Russia war has caused economic tremors around the world, disrupting supply chains, escalating the food and energy crises, and increasing global inflation. While these economic impacts are less significant than the impact this war has had on Ukraine, as well as the substantial number of lives lost, they still present challenges for many to prevent additional suffering.
While I will get into the global economic effects, it is important to acknowledge the impact this war has had on the Ukrainian people. First off, the Ukrainian people’s incomes have nosedived. As a result, this has also exacerbated poverty in Ukraine. According to the World Bank, poverty in the country soared from 5.5% of the population to 24.2% in 2022. https://www.economicsobservatory.com/ukraine-whats-the-global-economic-impact-of-russias-invasion. To put that further into perspective, one in four Ukrainians now live below the poverty line.
Moreover, the war has immensely disrupted global supply chains. Essential goods, including corn, wheat, metals, and sunflower oil, are usually exported in large quantities by Russia and Ukraine. However, manufacturing giants like Boeing and Ford have suspended operations in Russia. As Russia and Ukraine account for a whopping 30% of the global wheat production, this disruption has resulted in food shortages and inflation globally.
Although trade through the Black Sea has slowly begun picking up again, there is still a global food security crisis. Developing nations, where a large population depends on imported food, are especially suffering from the food crisis. Acute food insecurity is defined as having so little access to food that it threatens a person’s life or means of subsistence. This number increased from 135 million in 2019 to 345 million in 2022. https://www.consilium.europa.eu/en/infographics/how-the-russian-invasion-of-ukraine-has-further-aggravated-the-global-food-crisis/#:~:text=Due%20to%20the%20war%20Ukraine,but%20the%20outlook%20remains%20difficult.
Russia’s invasion of Ukraine heavily contributed to a global energy crisis. War-based sanctions placed on Russia’s energy sector have increased prices while reducing supply, as Russia is a significant exporter of oil and gas. Natural gas prices hit multi-year highs, and oil nearly $140 a barrel. This increase in energy prices has also driven up costs of other goods and services, accelerating inflation globally.
As inflation was already high from the COVID-19 pandemic, the war has exacerbated it more. In 2022, inflation hit its highest level in the past 25 years after a decade of meager inflation. The annual inflation rate in the 27 EU countries was 9.8% in July. As costs continue to rise, inflation rates are outpacing wage growth, decreasing the well-being of those affected.
The Ukraine-Russia conflict continues to seriously threaten numerous sectors of the global economy. Even more concerning is that we have yet to identify any long-term implications, as this is all so fresh. It is imperative to approach potential solutions proactively. With so much damage already done, finding ways to mitigate the suffering many have experienced is crucial.
