The Ukrainian crisis will slash trade
Ukrainian civilians retreat along the humanitarian corridors of Mariupol in Ukraine on March 20, 2022. More than 3.48 million Ukrainians have fled to neighboring countries, according to the UN refugee agency. Photo: AFP
The ongoing conflict between Russia and Ukraine has dealt a severe blow to the global economy, reducing projected world trade growth for 2022 from the 4.7% predicted last October to between 2.4% and 3%.
The projection, based on a global economic simulation model, was made by the secretariat of the World Trade Organization (WTO) in a note published on Monday.
According to the same model, the crisis could reduce global GDP growth by 0.7 to 1.3 percentage points, bringing it down to between 3.1% and 3.7% for 2022.
The conflict has driven up food and energy prices and reduced the availability of goods exported by Russia and Ukraine, the Secretariat note said.
Both Russia and Ukraine are major suppliers of essential goods, including food and energy, according to the note. The two countries supplied around 25% of wheat, 15% of barley and 45% of global exports of sunflower products in 2019. Russia alone accounted for 9.4% of global fuel trade, of which 20 % of natural gas exports.
Russia is one of the world’s leading suppliers of palladium and rhodium, which are crucial elements in the production of automotive catalytic converters. Meanwhile, semiconductor production depends to a large extent on neon supplied by Ukraine.
Disruptions in the supply of these materials could hit automakers at a time when the industry is just recovering from a shortage of semiconductors, the WTO said.
Europe, the main destination for Russian and Ukrainian exports, is expected to bear the brunt of the economic impact. Reduced shipments of grain and other foodstuffs will also inflate agricultural commodity prices.
Africa and the Middle East are the most vulnerable regions, since they import more than 50% of their cereal needs from Ukraine and/or Russia. A total of 35 African countries import food and 22 import fertilizer from Ukraine, Russia or both.
Some countries in sub-Saharan Africa are facing potential price increases of up to 50-85% for wheat, due to the impact of the crisis on grain shipments, according to the note.
“The current crisis is likely to exacerbate international food insecurity at a time when food prices are already historically high due to the COVID-19 pandemic and other factors,” he warns.
Ukraine’s gross domestic product (GDP) will shrink by 45.1% in 2022 due to the conflict with Russia, the Interfax-Ukraine news agency reported on Monday, citing a recent World Bank (WB) report. .
In its report, the bank predicted that the poverty rate in Ukraine will increase from 1.8% in 2021 to 19.8% in 2022. In 2023, the Ukrainian economy is expected to grow by 2.1%, down from to the previous projection of 3.5%. says the BM.