The Ukrainian conflict has slowed down the Ukrainian economy much more than that of Russia

As Russia invaded parts of Ukraine, the media couldn’t help but talk about the spillover effects of the conflict. What has this meant for the supply of natural gas to Europe? What did this mean for US foreign policy in Eastern Europe? Would Vladimir Putin stop in Ukraine or continue in the West? As tensions have stabilized, we are beginning to see how the Ukrainian conflict has affected the rest of the world, at least economically. Ukraine was hit the hardest, then Russia, then Europe, and by the time the ripples hit the rest of the world, it had virtually no impact.

In the first full public estimate of the economic effects of the conflict since April, the World Bank Ukrainian economy projects decrease by 5% this year due to heightened tensions with Russia. Businesses freeze investments due to the threat of political violence, residents stop spending in case they need money if the conflict worsens and import and export markets slow.

Some of the economic chaos in Ukraine has spread to Russia and other European economies. But, unsurprisingly, these citizens do not suffer as badly as the Ukrainians. The World Bank estimates that Russia’s economic growth will slow to 0.5 percent this year, nearly 2 percentage points lower than it would have been had Russia not annexed Crimea. On a continental scale, European growth will be reduced by around 1 percentage point due to trade ties with Russia and Ukraine.

But once the ripples spread to the world economy as a whole, the Ukraine conflict is barely noticeable. The report expects global gross domestic product growth to slow by only about a tenth of a percentage point this year.

For further proof, take a look at the VIX Index, commonly known as the “fear indicator” of financial markets. The VIX is a general measure of stock market volatility, compiled from stock options data by the Chicago Board Options Exchange Market. The VIX sharp when the Ukrainian conflict escalated in early February, but has since fallen to its lowest point since 2007, when the murmurs of the financial crisis started. The markets don’t seem to think the violence will escalate again in Ukraine – or if it does, that it will have much of an effect on the global economy.

Economically, the Russian-Ukrainian conflict has served absolutely nothing – and nowhere as much as in Ukraine.

Christi C. Elwood