Russia’s invasion of Ukraine to be felt around the world as energy, food prices rise, reports WTO

12 April, 04:51 PM
Ukraine cannot export grain as ports are blocked (Photo:rezerv.gov.ua)

Ukraine cannot export grain as ports are blocked (Photo:rezerv.gov.ua)

The war of the Russian Federation against Ukraine has not only caused a humanitarian crisis of immense proportions, but also dealt a severe blow to the global economy, the World Trade Organization said in a report on its website.

“The brunt of the suffering and destruction are being felt by the people of Ukraine themselves but the costs in terms of reduced trade and output are likely to be felt by people around the world through higher food and energy prices and reduced availability of goods exported by Russia and Ukraine,” the WTO Secretariat explained. 

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The organization believes that poor countries are at risk of suffering more from war, as they tend to spend more of their income on food compared to richer countries. This can negatively affect political stability. 

The WTO predicts that the crisis could reduce global GDP growth by 0.7-1.3 percentage points, resulting in growth between 3.1 and 3.7% in 2022. Growth in world trade this year could almost halve from 4.7%, projected by the WTO in October last year, to 2.4-3%.

Although the share of Russia and Ukraine in total world trade and output is relatively small, they are important suppliers of food and energy. These two countries in 2019 supplied about 25% of world wheat consumption, 15% of barley, and 45% of sunflower products. 

Russia is also one of the main world suppliers of palladium and rhodium, which are necessary for the production of catalytic converters for cars. In 2019 the Russian Federation provided 26% of global import demand for palladium. 

Semiconductor production is largely dependent 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. 

Some regions will feel the impact of the war more strongly than others. Europe, the main destination for both Russian and Ukrainian exports, is likely to bear the brunt of the economic impact. Reduced supplies of grain and other foodstuffs will also drive up the price of agricultural commodities, which will negatively impact food security in poorer regions. 

Africa and the Middle East are the most vulnerable regions, as they import more than 50% of their grains from Ukraine and/or Russia. 35 countries in Africa import food and 22 countries import fertilizer from Ukraine, Russia or both. Some countries in sub-Saharan Africa are facing a 50-85% rise in wheat prices as a result of the war. 

One of the long-term risks is that the war could provoke the collapse of the world economy into separate blocs, the WTO noted.

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