Our war against COVID-19 is not over yet, and we are already faced with another one: the conflict between Ukraine and Russia.
Wars are detrimental to everyone, and have always resulted in certain subsets of the population being left behind. As the famous saying goes, history always rhymes, and this is no different when analyzing the effects of all the world conflicts.
Similar to the financial effects of WW1, leading to the Great Depression, followed by WW2, and the massive shift in the global economy and financial divide, the escalated conflict between Ukraine and Russia has, and will continue to pose a risk to the global economy and thereby hinder financial inclusion. By now, 29% of the Ukrainian population are refugees or internally displaced people (IDP’s), and this number is still set to continue increasing. This means that a huge number of people are unable to maintain their livelihood as a result, leading to a decline in financial stability. Many sources believe that Ukraine’s GDP will decrease by 20%, and the poverty rate could increase by at least 30% due to the conflict.
Several economic hostilities, such as sanctions, airspace closures, trade restrictions, etc, have been imposed, which have been harmful to the global economy, and have resulted in shortages of several goods throughout the world. Due to this decreased supply, prices have increased globally, and it is harder to get specific goods or products.
Food production and export challenges
The war has led to a large spike in prices of common household items around the world, and along with the global pandemic, has stressed the economy and resulted in a “supply shock.” This has resulted in several necessities of life no longer being accessible to many people in the world. For example, wheat futures have increased by nearly 60% since the start of the year (2022) in Chicago, and is even higher in other places, as the Ukraine-Russia conflict has escalated. Globally, Russia and Ukraine account for 25% of global wheat exports, but some countries rely on Russian and Ukrainian wheat even more, such as Egypt, which imported 80% of its wheat from Ukraine. These countries (and the rest of the world) are faced with the plight of the poor and working class, as they are unable to keep up with these increasing prices and cost of living. The World Food Program stated that before the conflict began, globally 276 million people were faced with “acute hunger,” but as a result of the conflict, 27-33 million more people could be faced with the same situation.
Energy upheaval
Energy has also been impacted as a result of this conflict, since both Russia and Ukraine are among the top oil exporters globally. According to the UN, both Crude Oil and Natural Gas prices are up nearly 50% since December 2021, which is when tensions between Ukraine and Russia escalated. These increased oil prices have directly been passed on to the consumer throughout the world, which is not financially sustainable for the average person, and have made it harder for them to maintain their financial well-being. The energy markets have already experienced large volatility since the COVID-19 pandemic, which was further expounded upon.
Semiconductor Chip Shortages
Another notable example is the global chip shortage since 2020, which has become even more severe due to the conflict. Ukraine produces about 50% of the neon supply globally, and Russia produces about 40% of the global palladium supply, both of which are often needed to make chips, and have been at a standstill due to the conflict and sanctions.
Shortages similar to these have disrupted the world’s workings, and have been problematic to say the least. It is important that we take things into our hands, and advocate to work to resolve this global conflict, to alleviate the stress on the excluded populations, and be a step in the right direction of financial inclusion.
