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The World Bank warns that the Russian-Ukrainian crisis will hit the global economy. Institutions: Gl

Date: 2022-03-04
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Source:My steel 

As the impact of the Russian-Ukrainian crisis continues to penetrate into all aspects of the economy, more and more political and economic officials and industry institutions are warning that the conflict may hit the global economy hard.

David Malpass, President of the World Bank, recently warned to the British media: 'I think it's too early to say whether the war in Ukraine will lead to a global recession. However, it is obvious that this is a disaster for the world and will weaken global economic growth.

Malpas said that the economic impact of the conflict has gone beyond Ukraine's borders, and the rise in global energy prices has hit the poor hardest, as has inflation.

Malpas pointed out that Russia and Ukraine are both major food producers.' Food prices have also been pushed up by war, which is a very realistic problem for people in poor countries.'

According to S&PGlobalPlatts, Ukraine is the world's largest sunflower oil producer, Russia ranks second, and both countries account for 60% of global production. JPMorgan Chase's data show that these two countries also account for 28.9% of global wheat exports. Wheat prices on the Chicago Futures Exchange have soared to a 14-year high this week.

Due to Western sanctions, Russia's exports of the above-mentioned goods have been restricted, and extensive sanctions have made it difficult for the rest of the world to buy their products. And Ukraine's supply was also interrupted by the fighting, which has led to the blockade of the country's ports.

Malpas said that the same is true of Russia's energy supply, which is particularly harmful to Western Europe. About 39% of the EU's electricity comes from power stations burning fossil fuels, and Russia is the largest source of oil and gas.' There is no way to adjust the supply reduction in Ukraine and Russia sufficiently quickly, which will further push up oil prices.

At the same time, Malpas also pointed out that as the EU seeks to accelerate its transition to other energy sources, Russia may lose some markets 'permanently'. Similar income losses are only part of the conflict that weakens the living standards of the Russian people, and the depreciation of the ruble and the ensuing inflation are also posing a shock.

Since the Crimea incident in 2014, the World Bank has pledged $7.9 billion to help Ukraine develop its economy. These funds have helped the country carry out extensive economic reforms, including the privatization of the energy and banking sectors, and the improvement of agricultural productivity.

Institution: Global GDP may lose $1 trillion

It is worth mentioning that a well-known forecasting agency made a quantitative assessment of the specific impact of the Russian-Uzbek situation on the global economy in a report released on Wednesday and predicted that the conflict could drag down global economic output by about $1 trillion.

According to the agency's global economic measurement model, the Russian-Ukrainian conflict may cause the global economy to face a percentage point drag on the global economy by 2023 and may constitute three hundred percent on the global inflation rates in 2022 and 2023, respectively, according to the National Institute of Economic and Social Research (NIESR), said. The boost of points and two percentage points.

The report pointed out that the main way to affect the Russian-Uzbekstan conflict on the world economy is to push up energy prices, weaken confidence, weaken financial markets, and attract severe sanctions against Russia by the international community.

NIESR said that Russia and Ukraine are major global suppliers of commodities such as titanium, palladium, wheat and corn, and supply chain problems for users of such commodities such as automobiles, smartphones and aircraft will be exacerbated. Europe is the most affected by trade links and dependence on Russian energy and food supplies; emerging markets as a whole are less affected than developed economies.

The report believes that although for Russia, the losses caused by sanctions will be partially offset by rising prices of natural gas and oil exports, the net impact on the economy will obviously be negative, and Russia's GDP is expected to contract by 1.5% this year and by more than 2.5% by the end of 2023. Russia's inflation rate is expected to soar to more than 20% this year.

In addition, as the risk of recession increases, inflation in Western countries will continue to rise. NIESR expects the average inflation rate in the United States this year to be 7.1%, higher than the previous expected 4.6%; next year's inflation rate will reach 3.5%, higher than the previous 2.5%. In the UK, NIESR expects the average inflation rates in 2022 and 4.4 percent in 2023, respectively, up from the previous forecast of 5.3% and 2.7%.

NIESR also pointed out that the conflict has deepened the dilemma faced by global monetary policymakers because it can exacerbate inflation, weaken economic growth and undermine consumer and business confidence, both of which have been affected by the epidemic-driven price increases. NIESR's suggestion is that central banks should be cautious, but send a signal through communication that any extension of interest rate hikes is only postponed, not cancelled.

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