IMF: Ukraine conflict will affect global economy, trade, supply chains
Russia and Ukraine are the world's breadbasket - the conflict has increased prices of wheat and other popular commodities.
Slower growth and faster inflation threaten the global economy amid the conflict in Ukraine, according to the International Monetary Fund (IMF).
"The conflict is a major blow to the global economy that will hurt growth and raise prices," an article written by Alfred Kammer, Jihad Azour, Abebe Aemro Selassie, IIan Goldfajn, and Changyong Rhee said.
"Beyond the suffering and humanitarian crisis from Russia’s invasion of Ukraine, the entire global economy will feel the effects of slower growth and faster inflation."
The impacts of the conflict will flow through 3 ways, according to the article: "One, higher prices for commodities like food and energy will push up inflation further, in turn eroding the value of incomes and weighing on demand."
"Two, neighboring economies in particular will grapple with disrupted trade, supply chains, and remittances as well as a historic surge in refugee flows. And three, reduced business confidence and higher investor uncertainty will weigh on asset prices, tightening financial conditions and potentially spurring capital outflows from emerging markets," the article added.
Since Russia and Ukraine are two of the largest commodity producers, the conflict has led to increases in oil and natural gas prices, in addition to other commodities.
Food costs, particularly wheat, have risen dramatically hitting a new record such as in Lebanon, which imports 65% of its wheat from Russia and Ukraine.
"Beyond global spillovers, countries with direct trade, tourism, and financial exposures will feel additional pressures," according to the authors of the article.
"Economies reliant on oil imports will see wider fiscal and trade deficits and more inflation pressure, though some exporters such as those in the Middle East and Africa may benefit from higher prices."
The increase in fuel prices will affect the poorest most vulnerable regions the most: namely Sub-Saharan Africa, Latin America, the Caucasus and Central Asia, according to a blog post.
"Longer term, the war may fundamentally alter the global economic and geopolitical order should energy trade shift, supply chains reconfigure, payment networks fragment, and countries rethink reserve currency holdings," the article said.
"Increased geopolitical tension further raises risks of economic fragmentation, especially for trade and technology."
According to the UN Food Program, Ukrainian and Russian wheat account for 30% of global wheat exports, 20% of corn sales and 76% of sunflower seeds export. Countries around the Black Sea constitute the world's breadbasket.