How is the war in Ukraine affecting global trade and the economy?

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The Russian invasion of Ukraine and the ensuing war could have a range of repercussions for the international economy, including a potential food crisis.


Russia's invasion of Ukraine in February has created many consequences that have spread far beyond Europe, including major barriers to trade that are likely to have lasting effects for economies around the world.

Some of the biggest concerns relate to the supply of food, with the UN warning that the impact of the war - combined with other challenges including the economic shock of COVID-19 and climate change - threatens to "tip tens of millions of people over the edge into food insecurity, followed by malnutrition, mass hunger and famine, in a crisis that could last for years".

The consequences of the war for global trade

The World Trade Organization (WTO) previously predicted merchandise trade volume growth of 4.7 percent in 2022, but recently noted that "prospects for the global economy have darkened" since the outbreak of war in Ukraine. It has now revised its forecast down to 3 percent this year and 3.4 percent in 2023.

Supplies of food, energy and fertilizers from Russia and Ukraine have been severely hindered by the war, with grain shipments from Black Sea ports already suspended.

Other factors have added to the problem, including recent lockdowns in China to prevent any further spread of COVID-19, which have placed restrictions on seaborne trade.

WTO director-general Ngozi Okonjo-Iweala said: "The war in Ukraine has created immense human suffering, but it has also damaged the global economy at a critical juncture. Its impact will be felt around the world, particularly in low-income countries, where food accounts for a large fraction of household spending."

The organization pointed out that the uncertainty created by the war makes it difficult to formulate clear and accurate predictions about trade. It said growth in world merchandise trade volumes could range from as low as 0.5 percent to 5.5 percent.

Is a food shortage looming?

Supply of food is undeniably one of the biggest concerns to have emerged in the wake of Russia's invasion of Ukraine, partly because these countries produce almost a third of the world's wheat and barley between them, as well as half of global sunflower oil supplies.

Russia and Belarus are also the second and third biggest producers of potash, a key ingredient in fertilizer.

The sudden cut-off in Ukrainian exports of commodities including cooking oil, maize and wheat has had knock-on effects including higher prices for alternatives. UN secretary-general Antonio Guterres said global food prices have risen by nearly a third in the past year, while fertilizer and oil prices have increased by more than half and almost two-thirds, respectively.

This level of inflation is particularly damaging for developing countries, which don't have the fiscal capacity to manage the impact of such sharp and sudden increases.

Mr Guterres said: "Ending hunger is within our reach. There is enough food in our world now for everyone, if we act together. But unless we solve this problem today, we face the specter of global food shortages in the coming months."

What action needs to be taken?

The secretary-general outlined five steps the UN wants governments, international financial institutions and other bodies to take in an effort to "solve the short-term crisis and prevent long-term catastrophe".

These are:

  1. Increasing supplies of food and fertilizers to reduce pressure on markets, with no restrictions on exports and surpluses available to those with the highest need
  2. Ensuring social protection systems cater to everyone in need, with a combination of food, cash and targeted support for water supplies, sanitation and livelihoods
  3. Providing access to finance and liquidity to enable social protection, particularly for developing countries
  4. Bolstering agricultural production and investing in resilient systems that protect smallholder food producers
  5. Delivering sufficient funding for humanitarian operations to tackle famine and reduce hunger

The UN stressed there is "no effective solution" to the food crisis without crucial supplies from Russia, Belarus and Ukraine being reintegrated into world markets, despite the war.

It said Russia must allow grain exports from Ukrainian ports and also ensure its food and fertilizers can reach international markets without any impediments.

Mr Guterres said there is a route out of this situation and he is "hopeful", but there is "still a long way to go".

He added: "The food crisis has no respect for borders, and no country can overcome it alone. Our only chance of lifting millions of people out of hunger is to act together, urgently and with solidarity."