The economic impact of Russian invasion

[nahtanbob]

Ban on Russian will send crude skyrocketing to $200 barrel and push the global economy into a deep recession

 

[WotTen]

Will be interesting the global update of CIPS and non-Western alternatives to SWIFT.

Also, how much of the global fossil fuel sales switch to non-USD.

 

[mulj]

Main impact on economy of this war is that hard products and raw materials will always be the essence of world economy, not this digital nonsense stuffed into our throats.
That weakness of western economy is exposed.

 

[FuturePAF]

Ban on Russian will send crude skyrocketing to $200 barrel and push the global economy into a deep recession

More than likely. Even if all the major oil and gas producers ramp up production they won’t be able to replace the shortfalls cutting off Russian energy supplies will cause. I think they are pushing to end this war ASAP, or at least before this fall when temperatures drop and demand rises. The US will band oil and gas exports and Europe will be able to pay the higher prices and try to get by but the developing world will see prices more then double and be forced to cut back economic activity in hopes of just surviving. The sooner Russia stops the better; which they might do if they can manage to take the southern coast by May 9th and declare victory.

Sanctions on their oil and gas after that point depends on the western alliance’s strategy on dealing with Russia going forward

 

[Indos]

Ban on Russian will send crude skyrocketing to $200 barrel and push the global economy into a deep recession

Yellen statemen is good to bring down oil price, I see it will likely stay at 100 USD per barrel for rest of the year, receding from previous 110-120 USD per barrel we saw for some time during this March-April period.

If Iran sanction can be lifted, then the oil price has possibility to be in a range of 80-95 USD per barrel. We need oil price at least at this range, particularly important for net oil importer countries like Indonesia despite we can still manage to produce half of our oil domestic demand through our current oil production.

 

[Indos]

The sooner Russia stops the better; which they might do if they can manage to take the southern coast by May 9th and declare victory.

Sanctions on their oil and gas after that point depends on the western alliance’s strategy on dealing with Russia going forward

Russian will likely to capture eastern and southern region, it is already needed for Putin to stay in power (in order to avoid the perception among Russian that the invasion is failed).

So, the current sanction will remain as long as Russian keep that region and not drawing back completely from Ukraine territory. The possibility of Russian leave Ukraine territory is only if Putin is no more Russian leader according to my opinion.

There is no oil and gas sanction imposed by European, only US ban Russian oil. Their only sanction in term of Russian energy is only for Russian coal

 

[FuturePAF]

Russian will likely to capture eastern and southern region, it is already needed for Putin to stay in power (in order to avoid the perception among Russian that the invasion is failed).

So, the current sanction will remain as long as Russian keep that region and not drawing back completely from Ukraine territory. The possibility of Russian leave Ukraine territory is only if Putin is no more Russian leader according to my opinion.

There is no oil and gas sanction imposed by European, only US ban Russian oil. Their only sanction in term of Russian energy is only for Russian coal

Considering all the countries that abstained from condemning Russia for its Invasion of Ukraine, once the Black Sea is free from active hostilities Russia will be able to export food, machinery and Energy products to those countries.

Taking the southern coast is really the make or break for the Russians.

 

[OIO]

Americans need an external crisis to alleviate internal problems, and while it is equally harmful to the United States in the long run, they need short-term benefits.

In the end, it is the underdeveloped countries that are not self-sufficient in food and energy that will suffer the most. While Russia and Europe will also be affected by sanctions and being sanctioned.

East and Southeast Asia should be the least affected, but only if there are no countries like Ukraine.

 

[Indos]

Inflation to be Elevated for Longer on War, Demand, Job Markets​

APRIL 27, 2022

By Jorge Alvarez and Philip Barrett

Español, 日本語

The war in Ukraine will quicken inflation, which we now expect to remain elevated for longer than previously forecast on higher commodity costs and broader price pressures.

As the Chart of the Week shows, our latest World Economic Outlook now projects faster consumer-price increases this year for advanced economies as well as in emerging market and developing economies. These forecasts also have a high degree of uncertainty.

Russia’s invasion of its neighbor will likely have a protracted impact on commodities, affecting oil and gas prices more severely this year and food prices well into next year.

Four main factors shape our outlook:

• The war aggravated already surging commodity prices. Energy and food helped boost inflation last year, with oil and gas supplies tight after years of subdued investment and geopolitical uncertainty. This was a main inflation driver in Europe and, to a lesser extent, the United States. Rising food prices also played a major role in most emerging market and developing economies, as extreme weather reduced harvests and mounting oil and gas prices drove up fertilizer costs.
• Demand surged last year amid policy support, while supply bottlenecks grew on factory closures, port restrictions, shipping congestion, container shortages and worker absences. Inflation rose as a result, especially where recoveries were strongest. Demand should soften this year as policy support is withdrawn and supply bottlenecks ease, but China’s recurrent lockdowns, war in Ukraine, and sanctions on Russia will likely prolong disruptions in some sectors into next year.
• Demand is also rebalancing from goods to services. Spending shifted toward goods as pandemic restrictions disrupted in-person activities, with supply bottlenecks helping to boost goods prices. Though service inflation started picking up last year, pre-crisis spending patterns haven’t fully returned and goods inflation remains prominent in most countries. Services demand will increase further as the pandemic eases, and overall inflation should return to where it was before the coronavirus.
• Labor supply remains limited after significant tightening in some advanced economies like the United States and United Kingdom. Worker shortages, mainly in contact-intensive industries, are lifting wages, though inflation has eroded pay gains. Meanwhile, the pandemic reduced labor-force participation in advanced economies. These shifts appear related to earlier retirements and workers being unwilling or unable to return as infections continue. Some workers are putting in fewer hours. We assume labor supply will gradually improve this year as the health crisis abates, but the effects will be moderate and unlikely to significantly ease upward wage pressure.

Under these conditions, we expect already-elevated inflation to persist for longer. Our projections call for the pace in advanced economies to reach a 38-year high of 5.7 percent, while price increases in emerging market and developing economies will accelerate to 8.7 percent, the fastest clip since the global financial crisis in 2008. Those rates would then cool next year to 2.5 percent and 6.5 percent, respectively.

Importantly, surging prices will have the greatest effects on vulnerable populations, particularly in low-income countries. High overall inflation will also complicate the trade-offs for central banks between containing price pressures and safeguarding growth.

While our baseline expectation is that inflation will eventually ease, inflation could turn out higher for several reasons. Worsening supply-demand imbalances, including from the war, and further commodity-price gains could keep the pace of inflation persistently high. Moreover, both the war and renewed pandemic flare-ups could prolong supply disruptions, further increasing costs of intermediate inputs. In a context of tight labor markets, nominal wage growth could also accelerate to catch up with consumer-price inflation as workers seek higher wages to preserve their purchasing power. This would further intensify and broaden inflation pressures, with the risk of de-anchoring inflation expectations.

Inflation to be Elevated for Longer on War, Demand, Job Markets

By Jorge Alvarez and Philip Barrett Español, 日本語 The war in Ukraine will quicken inflation, which we now expect to remain elevated for longer than previously forecast on higher commodity costs and broader price pressures. As the Chart of the Week shows, our latest World Economic Outlook now

blogs.imf.org

 

[Indos]

Indonesia still has potency to tame the inflation no more than 3 percent for whole 2022, as March inflation is still around 2.6 %, much lower than most of the countries in the world is experiencing.

https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/sp_249422.aspx

 

[Wolfhunter]

The economic impact of lol BREXIT, COVID 19 and now the war in Ukraine is really starting to bite British businesses and consumers alike!

 

[Indos]

PRESS RELEASE
APRIL 26, 2022

Food and Energy Price Shocks from Ukraine War Could Last for Years​

Shift to more costly trade patterns has begun; transition to cleaner energy could be delayed

WASHINGTON, April 26, 2022—The war in Ukraine has dealt a major shock to commodity markets, altering global patterns of trade, production, and consumption in ways that will keep prices at historically high levels through the end of 2024, according to the World Bank’s latest Commodity Markets Outlook report.

The increase in energy prices over the past two years has been the largest since the 1973 oil crisis. Price increases for food commodities—of which Russia and Ukraine are large producers—and fertilizers, which rely on natural gas as a production input, have been the largest since 2008.

“Overall, this amounts to the largest commodity shock we’ve experienced since the 1970s. As was the case then, the shock is being aggravated by a surge in restrictions in trade of food, fuel and fertilizers,” said Indermit Gill, the World Bank’s Vice President for Equitable Growth, Finance, and Institutions. “These developments have started to raise the specter of stagflation. Policymakers should take every opportunity to increase economic growth at home and avoid actions that will bring harm to the global economy.

Energy prices are expected to rise more than 50 percent in 2022 before easing in 2023 and 2024. Non-energy prices, including agriculture and metals, are projected to increase almost 20 percent in 2022 and will also moderate in the following years. Nevertheless, commodity prices are expected to remain well above the most recent five-year average. In the event of a prolonged war, or additional sanctions on Russia, prices could be even higher and more volatile than currently projected.

Because of war-related trade and production disruptions, the price of Brent crude oil is expected to average $100 a barrel in 2022, its highest level since 2013 and an increase of more than 40 percent compared to 2021. Prices are expected to moderate to $92 in 2023—well above the five-year average of $60 a barrel. Natural-gas prices (European) are expected to be twice as high in 2022 as they were in 2021, while coal prices are expected to be 80 percent higher, with both prices at all-time highs.

“Commodity markets are experiencing one of the largest supply shocks in decades because of the war in Ukraine,” said Ayhan Kose, Director of the World Bank’s Prospects Group, which produces the Outlook report. “The resulting increase in food and energy prices is taking a significant human and economic toll—and it will likely stall progress in reducing poverty. Higher commodity prices exacerbate already elevated inflationary pressures around the world.”

Wheat prices are forecast to increase more than 40 percent, reaching an all-time high in nominal terms this year. That will put pressure on developing economies that rely on wheat imports, especially from Russia and Ukraine. Metal prices are projected to increase by 16 percent in 2022 before easing in 2023 but will remain at elevated levels.

“Commodity markets are under tremendous pressure, with some commodity prices reaching all-time highs in nominal terms,” said John Baffes, Senior Economist in the World Bank’s Prospects Group. “This will have lasting knock-on effects. The sharp rise in input prices, such as energy and fertilizers, could lead to a reduction in food production particularly in developing economies. Lower input use will weigh on food production and quality, affecting food availability, rural incomes, and the livelihoods of the poor.”

Special Focus: The Impact of the War in Ukraine on Commodity Markets​

The report’s Special Focus section offers an in-depth exploration of the war’s impact on commodity markets. It also examines how commodity markets responded to similar shocks in the past. The analysis finds that the war’s impact could be longer-lasting than previous shocks for at least two reasons.

First, there is less room now to substitute the most affected energy commodities for other fossil fuels—because price increases have been broad-based across all fuels. Second, the increase in prices of some commodities is also driving up prices of other commodities—high natural-gas prices have raised fertilizer prices, putting upward pressure on agricultural prices. In addition, policy responses so far have focused more on tax cuts and subsidies—which often exacerbate supply shortfalls and price pressures—than on long-term measures to reduce demand and encourage alternative sources of supply.

The war is also leading to more costly patterns of trade that could result in longer-lasting inflation. It is expected to cause a major diversion of trade in energy. For example, some countries are now seeking coal supplies from more remote locations. At the same time, some major coal importers could step up imports from Russia while reducing demand from other large exporters. This diversion will likely be more costly, the report notes, because it involves greater transportation distances—and coal is bulky and expensive to transport. Similar diversions are occurring with natural gas and oil.

In the near-term, higher prices threaten to disrupt or delay the transition to cleaner forms of energy. Several countries have announced plans to increase production of fossil fuels. High metal prices are also driving up the cost of renewable energy, which depends on metals such as aluminum and battery-grade nickel.

The report urges policymakers to act promptly to minimize harm to their citizens—and to the global economy. It calls for targeted safety-net programs such as cash transfers, school feeding programs, and public work programs—rather than food and fuel subsidies. A key priority should be to invest in energy efficiency, including weatherization of buildings. It also calls on countries to accelerate the development of zero-carbon sources of energy such as renewables.

Commodity Markets Outlook April 2022

The war in Ukraine has dealt a major setback to commodity markets, altering global patterns of trade, production, and consumption in ways that will keep prices unusually high through the end of 2024, according to the latest Commodity Markets Outlook. The report’s Special Focus section analyzes...

www.worldbank.org

 

[Indos]

IMF will release their GDP growth projection revision in April

How War in Ukraine Is Reverberating Across World’s Regions

blogs.imf.org

I doubt with India and Vietnam GDP projection made by IMF for 2022 and 2023. For both countries I see GDP growth will be within 5-5.5 % for entire 2022. Vietnam Q1 data has already been released and it is just 5.03 %.

IMF economist still think previous trend can happen in both India and Vietnam while Today we have seen different economic environment of high energy prices and commodity prices that basically has been started since early 2021.

This is why India Q4 (October-Desember) 2021 economic growth is only 5.4 % as we know energy crisis started in October 2021 where at that time energy and commodity prices are still below current level. For example, coal price is now at 320 USD per ton, while in October 2021 it was around 270 USD per ton. Oil price was still at 70-80 USD per barrel in October 2021, while Today we have seen oil price is stable at 97-105 USD per barrel.

Asia Growth Slows on Commodities, Covid and Rising Interest Rates

Region’s policymakers face difficult policy trade-offs and should protect the most vulnerable from rising fuel and food costs while enacting economic reforms to boost long-term growth.

blogs.imf.org

 

[Indos]

Global Economics Intelligence executive summary, April 2022​

May 9, 2022 | Article

Amidst high inflation and the continuing war in Ukraine, strong demand persists; forecasting institutions trim growth estimates.

Inflation accelerated in the United States and Eurozone to 8.5% and 7.5%, respectively, with high energy prices as the principal driver (Exhibit 1). The US economy contracted –0.4% in the first quarter of 2022; economists are citing steep increases in US imports as a cause of the retreat. Developed and emerging economies alike are experiencing continuing supply chain disruptions and productions shortages, challenges magnified by the effects of Russia’s invasion of Ukraine.

Recent monthly data suggest, however, that global economic fundamentals are sound and overall demand remains strong. Output is limited by shortages in labor and supplies. Central banks are now attempting to walk a fine line between controlling inflation and squelching economic growth. Yet interest rate rises cannot be expected to reduce inflation decisively, since it is largely driven by high energy prices. Given these difficult dynamics, the OECD composite leading indicators point to a slowdown in most economies. The directional indicators are consonant with results from the most recent McKinsey survey of economic conditions, taken in March. In view of the invasion of Ukraine, respondents identified geopolitical conflict as a top risk to global growth. Overall sentiment about the economy remains mainly positive but has moderated.

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Global trade and supply chains were affected soon after China imposed restrictions in Shanghai to stop the spread of COVID-19. The measures are now being lifted, but China is still recording between 1,000 and 3,500 new cases daily. These figures are low by global standards, but the government is sticking to a zero-COVID-19 policy, and health authorities have ordered mass testing in Beijing. The approach to the pandemic adds to the challenges facing the Chinese economy as the government attempts to meet its GDP growth goal of 5.5% (Q1 growth was 4.8%).

Most forecasters have trimmed previous growth estimates of GDP growth. The International Monetary Fund (IMF), for example, in its April 2022 edition of the World Economic Outlook survey, highlighted the limiting factor of Russia’s invasion of Ukraine. The IMF now foresees 3.6% global growth in 2022 and 2023, respectively, 0.8 and 0.2 percentage points slower than the estimates in January’s report. The report likewise reduced 2022 growth estimates for the United States to 3.7% (from 4.0%), the eurozone to 2.8% (from 3.9%) and China to 4.4% (from 4.8%). In the first quarter of 2022, the US economy contracted –0.4% after expanding 1.7% in the previous quarter.

In March, consumer confidence continued to decline as inflation pressure intensified. The OECD global consumer confidence index fell to 97.7 in March (98.4 in February). Retail sales have been sluggish. A resurgence of consumption in February in China was halted by the renewed pandemic restrictions; eurozone and US sales values continue to rise under inflationary conditions (Exhibit 2).

Global purchasing managers’ indexes (PMIs) for manufacturing and services continue to show expansion, but the pace is decelerating. Individual manufacturing PMIs are retreating, except in the United States (59.7 in April) and Brazil; demand remains strong in the eurozone, but input shortages are the limiting factor (Exhibit 3).

Exhibit 3

Services PMIs have been negatively affected by renewed lockdowns in China, inflation-induced consumer reticence in the United States, and, in Russia, the exit of foreign companies. In Europe and Brazil, the services PMI rose with the lifting of pandemic restrictions.

In February, world trade volumes set another historic high, rising 0.3% over January’s level, according to the CPB World Trade Monitor. Notably, however, the Container Throughput Index dropped to 117.1 from 120.7 in January. This decline was caused by the combined effects of Chinese New Year and the pandemic restrictions in China.

Unemployment rates have descended in the United States (3.6%) and the eurozone (6.8%) while rising in India (8.1%) and China (5.8%).

Consumer inflation is intensifying in most surveyed economies, while producer price inflation, which has been very high, stabilized or decelerated. Commodity prices remain at elevated levels in most categories, including energy, industrial metals, livestock, and agriculture. The FAO Food Price Index has risen to its highest-ever level, with a 13% jump in March. The UN is warning of a looming food crisis, especially for certain poorer nations, given the magnifying effect of Russia’s war in Ukraine.

Inflation expectations in the United States are the highest in recent history (as reflected in the spread between five- and ten-year yields on Treasury bills versus inflation-protected securities) (Exhibit 4).

Exhibit 4

The combination of heightened geopolitical uncertainty and high inflation caused stock markets to slide in March; the situation stabilized in early April and then deteriorated once again. In US markets, tech stocks were hard hit: the NASDAQ index lost more than 13% of its value in April, its worst month since 2008.

The US dollar continued to strengthen against the euro; the real strengthened, and the ruble recovered nearly to preinvasion values. Despite the inflationary environment, however, gold prices have been mostly stable. The volatility indexes remain elevated in all markets, including equities and oil. The Brent crude oil price was $105 on April 27.

As reflected in climbing bond yields, the cost of capital for governments surged, driven mainly by high inflation expectations. In March, the US Federal Reserve raised its policy interest rate one-quarter point; in early May, it raised the rate by one-half point, to 0.75–1.0%. The Fed also signaled that further hikes will come quickly and confirmed its intention to unwind its $9 trillion balance sheet.

In China, in recognition of worsening external conditions, President Xi Jinping announced a large new infrastructure plan on April 26, which is intended to strengthen national security as well as stimulate the slowing economy. Government sources note that special emphasis will be given to technological infrastructure, including the internet, supercomputing, and AI.

Global Economics Intelligence executive summary, April 2022

Amidst high inflation and the continuing war in Ukraine, strong demand persists; forecasting institutions trim growth estimates.

www.mckinsey.com

 

[Indos]

GDP Growth - First quarter of 2022, OECD​

GDP Growth - First quarter of 2022, OECD

OECD Information for journalists, OECD GDP growth slows sharply in the first quarter of 2022

www.oecd.org