Page 48 - Nigeria one mag 4 edition en

Global economic implications of the Russia-Ukraine

war

Currencies of Russia and Ukraine, illustration image

During the last two years, nations worldwide have experienced a health crisis, the Covid 19, which has had a
drastic impact on their economies. There is little hope of a prompt post-pandemic recovery in Europe and Central
Asia due to the ongoing war in Ukraine. Based on the World Bank’s Economic Update for the region, released on
Oct 4, 2022, economic activity will remain deeply depressed through next year, with minimal growth of 0.3%
expected in 2023, as energy price shocks continue to impact the region. According to the latest estimates, the
Ukrainian economy is expected to contract by 35% this year, despite the destruction of productive capacity,
damage to agricultural land, and the reduction of labor supply resulting from the displacement of more than 14
million people. The World Bank estimates that Ukraine's recovery and reconstruction needs total of $349 billion,
more than 1.5 times the country's pre-war economy in 2021.
Anna Bjerde, World Bank Vice President for Europe, and the Central region stated “Russia’s invasion of Ukraine
has triggered one of the biggest human displacement crises and exacted a heavy toll on human and economic
life”. War-related disruptions in trade and food and fuel price shocks continue to weaken the global economy,
resulting in high inflation and tighter lending conditions. Euro-area activity, the largest economic partner for
emerging and developing economies (EMDEs) in Europe and Central Asia, has declined sharply in the second half
of 2022 as supply chains have deteriorated, financial strains have increased and consumer and business
confidence has decreased. As a consequence of the invasion, energy prices have soared amid large reductions in
the Russian energy supply.
After Russia invaded Ukraine, oil, gas, and coal prices skyrocketed, causing inflation to reach levels not seen in
decades in this region. Although oil, gas, and coal have been rising globally since early 2021, the Ukraine-Russia
crisis has exacerbated this crisis. Both consumers and governments are affected by this unprecedented crisis,
which constrains fiscal affordability, firm productivity, and household welfare. The countries that are hardest hit
are those whose energy demand is fueled primarily by Russian natural gas imports for heating (which accounts
for 30% of energy demand), industry, or electricity. To mitigate the worst effects of gas shortages on households
and businesses, these countries must prepare for gas shortages and implement quotas or rationing plans, as well
as save energy and make energy more efficient. A behavior change campaign geared towards improving heating
efficiency in buildings and homes requires relatively little investment and has immediate impacts. Consumers
are being hit hard by the ongoing Russia-Ukraine crisis, the Covid pandemic and the subsequent increase in food
and fuel prices, and governments should be prepared to cope with massive, unexpected shocks that unfold very
quickly. In addition to impeding the flow of goods, the war is leading to dramatic product shortages and cost

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