Ukrain and Russia war:Could this war lead to a global economic crisis?
Everyone have this question in their mind.Despite the ongoing war between Ukraine and Russia, the global economy will grow this year, but the effects of this war will be felt around the world.How bad the effects of this war will be depends on how long this war lasts.
This period will determine whether the recent inflation in the world market is a temporary blow or whether it will remain permanent.In this article we have tried to find out how this war is affecting the global economy and whether it could lead to a global economic crisis.
The economic consequences of this war will be 'serious' for Ukraine and Russia, but the effects will be different for the rest of the world.Turkey and Poland, for example, have important trade ties with Russia, and for these countries the effects of the war will be more severe than in other economies.
Poland imports 50 percent of its oil from Russia, while Turkey gets one-third of its supplies from Russia. But the volume of US trade with Russia is only 0.5% of its GDP, while that of China is 2.5%, so the effects of this war on these countries will be very limited.
The war between Ukraine and Russia is likely to slow the global economy's growth by 0.2 percent, to 3.8 percent this year instead of the expected 4 percent.But this is subject to the fact that the dispute does not last long. Obviously, if this war continues for a long time, its effects will be more serious.
Rising inflation:
Another important element of this war that needs to be kept in mind is the impact on oil prices. Which is already stirring in the world market.Russia is the world's third largest oil producer after the United States and Saudi Arabia.It extracted 10.5 million barrels of oil per day in 2020 and sold five to six million barrels per day, of which more than half was imported to Europe.
Brent crude hit a record high on March 7 after the United States and Europe signaled a ban on Russian oil imports.After rising 21 percent last week, it rose another 18 percent to 140 140 a barrel.On March 8, the United States and Britain announced a ban on Russian oil imports.
The move would push oil prices above 200 dollars a barrel.On March 8, Alexander Novak, Russia's deputy prime minister, went even further, saying that "the rise in oil prices would be unexpected and could reach 300 dollars a barrel."
Rising oil prices have not only pushed up fuel prices, but also affected everything else.The reason for rising inflation is that fuel and energy are the basic costs incurred during the manufacture and transportation of goods.
The combination of rising oil prices and inflation could lead to a crisis of 'unemployment, recession and oversupply'.They have already slashed global economic growth estimates by one percent due to the Ukraine-Russia war.Experts call this potential crisis a "stagflation" and it means that this crisis arises when there is a constant rise in inflation and economic stagnation in a country.
The ongoing war between Ukraine and Russia could lead to a rise in global food prices, as both Russia and Ukraine are major food producers.Russia and Ukraine produce 14% of the world's wheat and 29% of world exports.The two countries also produce large quantities of corn and sunflower oil.
Any disruption in the supply of goods could put buyers in trouble in the Middle East, Africa and Turkey.Lebanon, Egypt and Turkey get most of their wheat from Russia or Ukraine.Sudan, Nigeria, Tanzania, Algeria, Kenya and South Africa also depend on Russian and Ukrainian commodities.
"It's not important to me that we're heading into a global food crisis, but it's about how big and long this crisis can be," said Seven Tour Holister, head of Yara,one of the world's largest fertilizer companies.'Fertilizer prices are already skyrocketing due to gas prices. Russia is one of the largest exporters of fertilizers.
More than half of the population gets food only from the use of fertilizers and if its use in the fields is stopped, the yield of a few crops will be reduced by fifty percent.
Increase in interest rates:
Rising energy and food prices are expected to push up inflation by up to 1 percent in developing countries.In some Central European and Latin American countries that are already struggling with inflation, their central banks will try to counter it by raising interest rates.
It will put more burden on the economies of these countries.Meanwhile, daily spending will increase in some parts of Eastern Europe, including Germany, Italy and Turkey, which are heavily dependent on Russian gas.