According to reporters, Globe Bank President Jim Yong Kim has described the conflict in Ukraine as a “catastrophe” for the world that will stifle global economic growth.
“The Ukrainian conflict comes at a poor moment for the globe since inflation was already growing,” David Malpass remarked.
He stated that his main worry is “the pure human loss of life” that is taking place.
The combat is estimated to have killed thousands of civilians and troops.
Mr Malpass stated that the war’s economic impact extends beyond Ukraine’s borders, and that global energy price increases, in particular, “hurt the poor the hardest, as does inflation.”
The battle has also increased food costs, which “are a very significant issue and worry for people in underdeveloped nations.”
Both Russia and Ukraine, according to Mr. Malpass, are major food producers. According to S&P Global Platts, Ukraine is the world’s largest producer of sunflower oil, followed by Russia. They account for 60 percent of world output between them.
According to JP Morgan, the two countries account for 28.9% of worldwide wheat exports. Wheat futures on the Chicago Mercantile Exchange are at 14-year highs.
Because of the extensive sanctions, Russian supply of these commodities are limited, making it difficult for the rest of the world to purchase its goods. Because the country’s ports have been blocked due to war, supplies have been halted.
“There’s no way to respond to the loss of supply from Ukraine and Russia quickly enough, and that adds to pricing,” Mr Malpass added.
He claims that the same is true of Russian energy sources, and that it is especially harmful to Western Europe, where governments have “ignored other parts of how to have adequate electricity.” Around 39% of the EU’s electricity is generated by power plants that burn fossil fuels, with Russia being the largest supplier of oil and gas.
Vladimir Putin’s administration “may permanently lose some of their markets” if the EU accelerates its transition to other energy sources, according to Mr Malpass. This loss of revenue is only one way that the conflict will wreak havoc on Russia’s living standards, as will the rouble’s depreciation and the inflation that entails.
Since the revolution in 2014, the World Bank has contributed $7.9 billion to assist Ukraine grow its economy. This money has aided the government in implementing a wide range of economic changes, including energy and banking sector privatizations, as well as attempts to increase the productivity of its farms.
The Russian invasion began less than a month prior. After the pandemic’s challenges, Ukraine’s autonomous central bank predicted that the $180 billion GDP would increase 3.4 percent this year.
According to Alexander Rodnyansky, President Zelensky’s economic adviser, war will have “catastrophic consequences for our economy and the region as a whole.”
“We’ve already witnessed huge loss of roads, bridges, and infrastructure,” he continues. As a result, once the battle is finished, it will have to be rebuilt over time.
“It’s difficult to put a number on it right now, but we can see that we’ve already lost up percentages and GDP growth as a result of what’s already transpired.”
The workforce has reduced considerably as hundreds of thousands of Ukrainians have fled the nation or joined the battle against Russia, making it harder to maintain the wartime economy.
“Production is completely collapsing,” Mr Rodnyansky adds, adding that crucial food and energy sources are being disrupted.
Big western corporations with large operations in Ukraine, such as food maker Nestle and brewer Carlsberg, have been hampered by the war.
In recent years, a rush of foreign investment has aided in the reshaping of the Ukrainian economy, which has been accompanied by a crackdown on corruption as part of an agreement for economic assistance from the International Monetary Fund and the World Bank.
That move, according to Mr Rodnyansky, “clearly represents the people of Ukraine’s desire to integrate with the European Union, to be a member of the European family, and to simply have a democratic, powerful, economically free nation that is prospering.”
He claims that a push toward digitalisation has made doing business in the nation easier: “It’s the polar opposite of what’s going on in Russia… That may be another reason why Russian President Vladimir Putin openly despises Ukraine and everything it stands for.”
Mr. Malpass is afraid that the war will have a long-term negative impact on the improvements that have benefited Ukraine’s economy and people.
One of the reasons the World Bank is putting up a $350 million aid package for Ukraine is to prevent them from unraveling. It is anticipated to be approved within the next few days.
Mr Malpass stated, “It will assist support Ukraine’s budget.” Because tax revenues have plummeted as a result of the conflict, it will be used to help pay for government salaries, social assistance, and emergency supplies.
He recognizes that the war might “be a long [economic] setback, where Russia draws them toward Russia, under the principles, the aims of an individual leader,” in addition to endangering the lives of millions of Ukrainians.
“Their per capita income has slipped behind China’s, in part due to economic mismanagement and in part due to the fact that they have kept such a centralised decision-making structure under Putin for the time being, ever since 2000.”
“The risk is that Ukraine is ruled by that,” he continues.