The United States started reporting unusual movements of Russian troops near Ukraine in November 2021. Even after many warnings to Russia and financial security aid given by the United States to Ukraine, Russia did not stop trying to disturb Ukraine’s environment. Over the period of four months, things started escalating in separatist regions of eastern Ukraine.
On 24th February, it was clear that Vladimir Putin, The President of Russia, wanted to carry out a special military operation, according to his announcement. He also mentioned that Russia is just trying to “demilitarise and denazify” Ukraine. On the same day, Kyiv, Kharkiv, Odesa, and Donbas reported explosions. Even though Putin claimed in his announcement that Russia does not want to occupy Ukraine, there were enough pieces of evidence of military troops and ballistic missiles to prove otherwise.
Beyond the sufferings of the Ukrainians and the humanitarian crisis that they have to face, the situation is just worsening and affects Ukraine’s economy. While the rest of the world, with its indifference to this crisis, might find this as just Ukraine’s problem, we might want to look at how this is affecting global politics, economy, and business development.
The Impact of the war on the Global Economy
While the world was just starting to recover from the horrors of the pandemic, the Ukraine-Russian war is a threat to the already fragile global economy. The World Trade Organization said, “this war would damage the world trade growth this year and drag down the global GDP”.
The invasion has sparked concerns about the shortage of crude oil over the world since Russia is the largest exporter. Many countries depended on Ukraine and Russia for food, energy, and other commodities. Because of this crisis, the major suppliers of these essential goods are facing challenges to keep up with the production. Even if they do produce, it’s challenging and risky to export these goods to other countries, given that the means of exports are restricted. The people of the affected area are risking their lives to keep their businesses running and struggling to do so, struggling to survive.
Exports are not the only problem that the rest of the world is facing right now. There has been a hike in refugees, as well. While a lot of countries have offered a helping hand, it is going to take a toll on their GDP as well.
Over 1.5 million refugees took refuge in Poland, which means the rise in the population is around 4%. We might look at an increase in inflation and stagflation in Poland.
The Impact of the war on the Global Business Development
Russia and Ukraine are few of the largest suppliers of raw materials. Since the Russian invasion of Ukraine, the ports in Ukraine are blocked and as a result of that, Ukraine’s hands are tied.
Because crude oil prices are high now that it is more difficult to export, the automobile industry is taking a hit as well.
Russia is one of the largest exporters of rare metals, the semiconductor industry is barely surviving.
Many international firms have seen their shares drop in recent months, and if the conflict continues, further declines will likely be seen.
As we have seen, the impact of the conflict in Ukraine on business and finance has been significant. So will there be more impact on business and the global economy? Based on the current state of global markets, it seems likely that there will be some volatility in the future. There is also a risk to global economic growth. While this should not discourage companies from trying new things, caution is necessary.