The war between Russia and Ukraine hit the world with numerous macroeconomic and microeconomic effects worldwide. The Europeans and least developed countries of Africa felt the heat of the war too strongly. Though there are massive effects inflicted into almost all countries around the world, the World Trade Organisation claims that the impact on the global economy is not as severe as anticipated at the start of the war.
The WTO said this line in one of their reports last week. The report examines the effect of the Ukraine-Russia war on global trade and development. It wanted to highlight the steps taken by countries in the face of a decrease in Ukrainian and Russian export goods because of certain restrictions from the war. The WTO found several disparities between the actual and predicted effects of the war on global trade and the economy.
So, what are these disparities that the WTO has observed, as stated? This article is going to discuss that answer.
What is the report about?
The report published by the WTO on their website was titled, “One Year of War in Ukraine: Assessing the Impact on Global Trade and Development.” The WTO revealed the report earlier this week. The report was designed to forecast the resilience and performance of the world economy in 2022. In the report, the WTO demonstrated that the global economy performed better in 2022 than the assumptions it made. After the end of the year, the WTO’s predictions went wrong, as the world’s economy didn’t perform that badly.
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Though the war put various constraints on the global economy, it couldn’t stop the global economy from booming. The report revealed that, though the forecast called for only a 3.0 percent increase in the global GDP in 2022, the supply chain was recorded to surpass the projection by a good margin, hitting a 4.0 percent increase rate during the year.
This increase showed that, despite the complications of war, the world’s economy continued to rise further in 2022 too.
Highlights of the report
The report emphasised the importance of strengthening the trading system in order to overcome the world’s overall complications and maintain strong global economic growth, and warned that the most hard-hit countries of this war would be those with the least-developed economies. And the war will put further pressure on these countries if the cooperative hand of the international community falls short for them.
“Despite the Russia-Ukraine war, which is enough to blow the world economy hard, international trade continued to rise well,” said Mr. Ralph Ossa, the WTO’s chief economist. He further said, “Though this war caused significant devastation in the world, the global economy has maintained its upward trend.”
He also added, “We had some predictions about the war where we assumed the worst impact of the war on the world economy. However, we must thank the multilateral trading policy for its openness, as the global economy continued to grow despite higher prices and supply shortages. The cooperation of the governments of the countries also played a good role in this perspective, I must say.”
Prediction on the rise in price
The report said, “WTO expected a significant rise in the price of palladium and maize in comparison to the actual rise of 4.4 percent and 24.2 percent, respectively. Again, for the restrictions on exporting food products, the WTO predicted a rise of up to 85 percent of the wheat price, but it only rose by 17 percent.”
However, the report showed a fall in Ukrainian exports of 30 percent in 2022 in terms of value. This fall was experienced mostly in the supply of cereal, which was the focal point of many African countries’ food security. This amount has declined by 14.9 percent, which was a huge blow for these African countries as well as for Ukraine’s economy. This has forced these smaller economies to adjust their patterns of sourcing.
Ethiopia, for example, used to rely on Russia and Ukraine for 45 percent of its wheat imports. But as for the restrictions on Ukraine and Russia due to the war, Ethiopia had to go to the USA and Argentina to import about 21% of the total wheat they imported, though this country didn’t import even a percent from these two countries in the previous year.
On the contrary, due to the increase in overall price levels, the exports of Russia expanded by 15.6% in terms of value calculation, as an increase in exports of fuel, fertilizers, and cereal was noticed. However, there were estimates that Russia might see a slight decrease in their price in the coming months, but it would not be strong enough to have a significant impact on the country’s economy. The trade flows of Russia’s motor vehicles, aircraft, or pharmaceuticals were down due to the restrictive nature of the sanctions this year.
Impact on Bangladesh
Though the regular prices of daily necessities increased significantly, Bangladesh recorded a slightly better economy compared to its neighbouring countries. The country’s inflation rate forecast a five-consecutive fall in the previous month’s forecast, and it was the lowest among all inflation rates at this time. Bangladesh managed to maintain a good pace of its production capability, which is increasing the country’s export quantity and resulting in a fall in the overall price level.
Again, the foreign currency reserve of the country is also calculated to be increasing gradually, which is also a good sign for the country.
Though Bangladesh recorded a decrease in its overall forex reserves at first, it has now overcome that blow, and this country is experiencing a rise in its forex reserves as a result. To summarize, the impact of the Ukraine-Russia war in Bangladesh was significant enough to raise overall prices and slow imports of some goods in the early stages. However, Bangladesh is now well-positioned to maintain its nerve and meet the requirements of surviving the short term effects of the war.
