Finance
Russia’s invasion of Ukraine sent shockwaves through the global economy, and the world is fundamentally changed a year later, according to media reports.
Trends that were already in motion have accelerated as the need to transition away from fossil fuels and toward greener, renewable energy sources has become more pressing, according to The Guardian.
According to The Guardian, food prices have risen, increasing hunger in the developing world and forcing governments, businesses, and people to adapt to long-term changes.
Since the invasion, the rise in global energy prices has pushed inflation across advanced economies to its highest levels in decades, squeezing household incomes and weighing on economic growth.
The surge in inflation prompted central banks to raise interest rates, raising borrowing costs for households and businesses. Mortgage costs in the UK and several other nations have risen sharply, stoking fears of a property crash.
Economists anticipate rapid cooling in inflation in the coming months as the initial surge in energy prices is removed from the calculation for the annual increase in rising living costs. However, gas and electricity prices remain significantly higher than before the invasion, according to The Guardian.
Russia and Ukraine are the world’s largest and fifth-largest wheat exporters, accounting for nearly a third of global exports. They also produce a significant amount of fertilizer and other essential commodities. Food prices have risen to unprecedented levels as a result of the war, according to The Guardian.
While this has caused problems around the world, developing countries that are net food importers are particularly vulnerable. North African and Middle Eastern countries are among the largest buyers of Russian and Ukrainian wheat.
However, these poorer countries are dealing with a double whammy. The US Federal Reserve’s decision to raise interest rates in response to soaring inflation has increased the value of the dollar, making it more expensive for developing countries to import goods and borrow money on global markets denominated in US dollars.
Before the Russian invasion, international trade was already fragmenting, but the trend has accelerated in the last year due to rising geopolitical tensions and concerns about supply chain security. Companies have pushed to reshore or “friendshore” production, bringing it closer to home, following the disruption caused by Covid, and with an eye on the conflict and shifting global relations, according to The Guardian.
Ian Stewart, chief economist in the UK at accountancy firm Deloitte, said: “The lure of cheap raw materials from Russia is spurring sanctions avoidance on a previously unseen scale. Russian oil shunned by the EU has found ready customers in China, India and Turkey,” The Guardian reported.
Source:IANS
