Іmpact of Ukraine-Russia war on global trade and development: an empirical study

Abstract

The crisis in Ukraine has created a humanitarian crisis of immense proportions and has also dealt a severe blow to the globe economy. The brunt of the suffering and destruction are being felt by the people of Ukraine themselves but the prices in terms of reduced trade and output are likely to be felt by people round the world through higher food and energy prices and reduced availability of products exported by Russia and Ukraine. Poorer countries are at high risk from the war, since they have a tendency to spend a bigger fraction of their incomes on food compared to wealthier countries, this might impact huge political stability globally. From a macroeconomic perspective, higher prices for food and energy will reduce real incomes and depress global import demand. Sanctions will impose economic costs on not only Russia directly but also on its trading partners. Besides Russia and Ukraine, depressed gross domestic product (GDP) will probably be seen mostly in Europe given the region’s geographic proximity and its dependence on Russian energy. Trade costs will rise within the near term because of extraordinary sanctions, export restrictions, higher energy costs and transport disruptions furthermore. As a result, the impact of the war will wear world interchange 2022 might be greater than the impact on global GDP. While shares of Russia and Ukraine in world trade and output are relatively small, they're important suppliers of essential products, notably food and energy. Both countries accounted for 2.5 percent in world merchandise trade and 1.9 per cent in world GDP in 2021. Yet they supplied around 25 per cent of wheat, 15 per cent of barley and 45 per cent of sunflower products exports in 2019. Russia alone accounted for 9.4 percent of world trade fuels, including a 20 per cent share in fossil fuel exports. Many countries are highly obsessed on food imports from Russia and Ukraine. for instance, over 1/2 wheat imports in Egypt, the Lebanon and Tunisia come from Russia and Ukraine. Other countries are more addicted to imports of fuels from Russia, like Finland (63 percent) and Turkey (35 percent). Russia and Ukraine also are key providers of inputs into industrial value chains. Russia is one in all the most suppliers globally of palladium and rhodium, key inputs within the production of catalytic converters within the automotive sector and therefore the manufacture of semiconductors. Semiconductor production also depends to a considerable extent on neon supplied by Ukraine, which further provides variety of low-tech products to the ecu automobile value chain, like wire harnesses. Prolonged disruptions within the supply of those goods could harm the recovery of automobile manufacturing. Sanctions are already having a robust impact on Russia’s economy, with possible medium to long-term consequences. Disconnecting Russian banks from the SWIFT settlement system and blocking Russia’s use of interchange reserves have triggered a pointy depreciation of the ruble, reducing real incomes within the country. Most of the massive international firms also are abandoning the Russian market. Oil and gas exports have yet to be strongly full of the sanctions, but the crisis could accelerate the worldwide transition towards greener energy sources. Longstanding economic relationships are disrupted by the war and by the sanctions imposed in its wake. Eminent economists have simulated various scenarios parenthetically the channels through which trade may well be affected and to explore possible short-run and long-run effects. Global trade growth is projected to slow by up to 2.2 percentage points in 2022. long term impacts could even be large and consequential. there's a risk that trade could become more fragmented in terms of blocs supported geopolitics. whether or not no formal blocs emerge, private actors might prefer to minimize risk by reorienting supply chains. this might reduce global GDP within the long term by about 5 percent, notably by restricting competition and stifling innovation (WTO, 2022). The Global Economy has a crucial role to play in mitigating the negative effects of the crisis and in rebuilding a post-war global economy. Keeping markets open are critical to confirm that economic opportunities remain receptive all countries. this can be very true within the post-war period, when businesses and families will have to repair their balance sheets and rebuild their lives. Through its importance for international trade and its monitoring, convening and other functions, the WTO is central to making sure that international trade continues to serve billions of individuals across the globe. during this paper we are giving an empirical analysis of world trade and development impacted by the present Russian-Ukraine war.