How the war in Ukraine affects just everyone
Published on: Sunday, June 12, 2022
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Ukrainians seek shelter from Russian bombardment in a Kyiv basement.
The war has upended the fragile economic recovery from the Covid-19 pandemic, not only triggering a devastating humanitarian crisis but also increasing food and commodity prices and globally exacerbating inflationary pressures.
A new forecast released this week by the United Nations Department of Economic and Social Affairs shows how far global prospects have declined.
According to the World Economic Situation and Prospects (WESP), as of mid-2022, the global economy is now projected to grow by only 3.1pc in 2022, down from the 4pc growth forecast released in January.
Global inflation is projected to increase to 6.7pc in 2022, more than twice the average of 2.9pc during 2010-2020, with sharp rises in food and energy prices.
Why is this happening? Rising geopolitical and economic uncertainties are dampening business confidence and increasing borrowing costs are weakening investment prospects.
Additionally, there are major downside risks from further escalation of the war in Ukraine, new waves of the pandemic and faster-than-expected monetary tightening in developed economies.
All of this puts our efforts to achieve the world’s Sustainable Development Goals (SDGs) further off the 2030 target.
Prolonged supply chain disruptions and soaring commodity prices have contributed to higher manufacturing costs across the region, making it tougher for people in many countries to get the goods they need.
Furthermore, while China has been actively easing its monetary stance, Indonesia, Malaysia, Mongolia and Singapore have already entered or are expected to enter a tightening phase in 2022.
Other central banks remain hesitant to tighten policy, taking into account that higher interest rates will likely negatively impact growth and recovery.
With the exception of Lao PDR, Mongolia, and Myanmar, inflation in the region is projected to remain below 5pc.
However, the expected rebound of the Chinese economy by the end of 2022, and a recovery in international tourism, should bolster growth in the region in 2023.
Developed East Asian economies, while still lagging behind other countries in the region, are forecast to register resilient economic growth in 2022, with GDP increasing by 2.7pc in Japan and 3.1pc in the Republic of Korea.
As ever, it is the most vulnerable people in Asia and around the world who suffer greatest from slow growth, rising inflation and the energy and food system disruptions stemming from the war in Ukraine.
The decline in real incomes is particularly worrying in developing countries where poverty is more prevalent, wage growth remains constrained, and fiscal support measures to alleviate the impact of higher oil and food prices are more limited.
In these countries, many of which are still struggling to recover from the economic shocks of the pandemic, food insecurity is getting worse, and many risk falling into poverty.
In these situations, women and children are often the most vulnerable, particularly when poorer nutrition results in lifelong impacts to health and well-being.
Governments therefore need to provide targeted support to alleviate the effects of higher food and fuel prices on vulnerable populations while pursuing medium-term fiscal and debt sustainability.
This will require strengthening social protection, accompanied by comprehensive debt restructuring and debt relief for poorer countries.
Bridging the finance divide while ensuring that resources catalyse the necessary transformations will be key in putting the SDGs back within reach.
Shantanu Mukherjee
Economic Analysis and Policy
Division, United Nations Department of Economic and Social Affairs
- The views expressed here are the views of the writer Shantanu Mukherjee and do not necessarily reflect those of the Daily Express.
- If you have something to share, write to us at: [email protected]
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