As it is getting prolonged, the impact of the Ukraine war on the entire global economy is becoming more pronounced. In fact, in this interconnected and interdependent world, one cannot think of punishing one country without affecting the rest of the world. So far, the West's obsession has been to punish Russia by slapping economic sanctions on the country for its having invaded Ukraine. The West as it represents the most industrially advanced nations on the Earth, it definitely has the economic might to teach Russia or any other country for that matter a lesson of a sort.
Under the leadership of the most powerful economy of the world, the USA, it has exercised this option more than once on a number of countries including China and Iran. But sanctions do not work in one direction only. As every country has economic and trade ties with the rest of the world, the sanctions have the potential to set off a chain reaction across the globe, even affecting the source where those (sanctions) originated from. However, the economically weaker nations are obviously their first casualties. The post-pandemic world market, already volatile due to high price of energy and commodities, has begun to spiral out of control. Whatever is happening in Sri Lanka, for example, should not be entirely attributed to the mismanagement of the economy by the ruling coterie. The uncontrolled price hike of food grains, other essential commodities and energy have definitely to do with the instability of the world economy. So is also the case with other smaller economies in South Asia, Africa and elsewhere in the world.
Director General of the World Trade Organization (WTO), Dr Ngozi Okonjo-Iweala did recently warn of looming food crisis which is going to adversely affect the poorer countries in Africa as elsewhere. Some 35 countries in Africa, according to WTO DG, import wheat and other food grains from Ukraine and Russia, while 22 countries import fertilisers. But with the war in Ukraine and Russia under strict economic sanctions from the West, the prospects of these African countries' meeting these vital needs is getting bleaker by the day. The food prices in some of these countries have meanwhile risen by 20 to 50 per cent.
Though Russia and Ukraine together account for only 2.5 per cent of the world's merchandise export, in some particular sectors their contribution to the world commodities market is crucial. For example, 46.9 per cent of the world's sunflower oil come from Ukraine, while 29.9 per cent from Russia. Forty per cent of global supply of the metal called, palladium, essential for making cars, come from Russia. A protracted Ukraine war with the sword of sanctions hanging on Russia, is going to affect the car industry in the near future. And the supply chain disruptions that started with the pandemic shows no sign of letup as the war has given them (supply chain disruptions) a new lease of life.
Small wonder that the head of the WTO, Dr Ngozi, has now revised the growth forecast of global trade by about half (from 4.7 per cent to 2.5 per cent). In a similar vein, the United Nations Conference on Trade and Development (UNCTAD) has alerted all saying that for the current year the global economic growth would decline from 3.6 per cent to 2.6 per cent due to the Ukraine war. At the same time, it has further noted that to meet their external public debt obligations, they will require to the tune of US$310 billion. The intergovernmental body created to promote the interests of developing nations further warned that as a fallout from the war, Russia is going to experience a 'deep recession' this year. But Western Europe, too, will go through what the world trade and development body said, 'significant slowdown', if not outright recession. Further, to go by the UNCTAD, Central, South and South-East Asia are also in for similar troubling experiences. So, there is hardly any room for complacency here seeing that the war is taking place in far-off lands.
Meanwhile, as they did last year, the advanced economies and the developing ones will be further tightening their monetary policies to contain inflationary trends. What is of further worry for this world body is that the explosive mix of 'weakening global demand, insufficient policy coordination at the international level and elevated debt levels from the pandemic', risks creating a financial 'shockwave' which would adversely affect some of the developing nations. They might face severe financial insolvency including recession and may find their economic growth stalled. But these are the warnings and forecasts on the economic and the financial fronts. But for less stable countries, both socially and economically, the consequences might be far-reaching.
If history is any guide, one can cite ample instances of economic uncertainties leading to social unrests and revolutions. And some political groups with their fringe, extremist ideologies of violence and hate are just lurking in the shadows to play on the people's fears and prejudices. The world has seen enough of such evil politics and its devastating fallouts. It is believed that the world leaders have learnt from past lessons. So, it is time, they showed more wisdom than continuing to test the limit of their perceived opponents. And, under no circumstances, it should reach the breaking point.