Impact and future outcome of Russia-Ukraine war

  • Declining GDP growth — Trade restrictions and sanctions imposed on Russia because of the war have hurt the GDP growth of countries exporting to Russia. Furthermore, restricted imports from Russia has led to the unavailability of certain commodities, negatively impacting the country’s manufacturing capabilities.
  • Countries are expected to import from other nations (e.g., oil and gas from the Middle East and food grains from Asia).
  • Escalating food inflation has spawned food insecurity in low-income nations including the Sub-Saharan Africa. If the conflict stretches, countries that import food grains from Russia and Ukraine may experience a shortfall (e.g., African nations, ASEAN 5 and the Middle East).
  • The price of metals, especially iron, has ratcheted up considerably as a result of the war, as it has forced the suspension of operations of steel plants in Russia and Ukraine. Prices of iron ore and semi-finished iron have also shot up, as they are in short supply. This will likely impact the economies that import them from the two countries. Also, the price of products using these commodities as input, such as automobiles, construction materials and infrastructure goods, will likely rise.
  • In March 2022, the volume of goods shipped by sea from Shanghai dropped 26% between March 12, 2022 and April 4, 2022.
  • Between 12 March 2022 and 4 April 2022, the volume of goods leaving the Shanghai ports by trucks contracted 19%.
  • The world relies heavily on China for manufacturing. Given the recent events and the aftermath of supply chain bottlenecks due to the lockdown in China, many companies are mulling moving their manufacturing units completely or partially from China.
  • The congestion at ports has also been guilty of inflating prices, as it has pushed freight cost higher. Freight cost for a single container from China to the US edged up from USD 5,900 last year to USD 15,800 this year.
  • The impact of the lockdown and restrictions is likely to be felt throughout 2022, as it will likely take several months to normalise port operations and bring it to pre-lockdown levels.

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Acuity Knowledge Partners

Acuity Knowledge Partners

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/