Upon writing this, Putin’s forces have been at war in Ukraine for 58 days. The Western world’s condemnation of President Putin’s actions has been reflected in the implementation of significant economic sanctions against Russia, and whilst the full global humanitarian, economic, geopolitical and strategic fallout from Russia’s invasion of Ukraine will take time to comprehend, some of the immediate economic consequences are already clear.
The conflict is a major blow to the global economy, and impacts will flow through three main channels. Firstly, higher prices for commodities (such as energy and food) are likely to push up prices further, leading to cost-push inflation (where the higher costs of importing raw materials for firms are passed on to the consumer resulting in higher prices for goods). This, in turn, may reduce the value of incomes and adversely affect consumer demand in the global economy. Secondly, reduced business confidence because of the widespread uncertainty will tighten financial conditions and could potentially deter capital inflows into emerging markets, which, on a global scale, could lead to stagnant development of affected emerging nations. Finally, economic issues may spill over directly into other countries, which will have to deal with disruptions in supply chains, remittances and surges in flows of refugees.
Longer term, the war may alter the global economic and geopolitical order but what has immediately become apparent is the Western world’s reliance on finite resources, in particular oil and natural gas from Russia and Ukraine — providing a preview of the devastating effects which shortages of these resources may provoke, especially in our increasingly energy-insecure world.
Claudia Maggs, Year 13