The effects of war are hitting the world economy

The Russian invasion of Ukraine has messed up the world economy and made things more unstable. The conflict’s effects will be negative, like the global economy’s problems before the Russian tanks came.

The war has made things worse for people affected by the COVID-19 pandemic, including increased public debt, inflation, and labor shortages.

World nations are putting more and more sanctions on weaponized Russian oil. The sanctions have intensified the conditions for an already urgent energy transition due to climate change.

The war has decimated Ukraine’s economy, shrinking it by a third, and sanctions are now beginning to drain Russia of energy and other export earnings. But its impact in other countries is more difficult to quantify.

Europe’s neighbors have avoided mass energy rationing and bankruptcy. They’ve done this by boosting fuel inventories, curbing energy demand, and, most importantly, by having an unusually mild winter.

Global food and energy prices have already been rising as the world emerged from a 2020 pandemic lockdown. They’ve surged after the outbreak of war. However, many indicies are lower than last year.

Expectations from the trade sector are high

The world economy seems to be on an upswing with the conflict. Financial markets are optimistic that advanced economies won’t have a full-blown recession. This is due to the strong economy and people’s belief that the conflict will eventually end.

The International Monetary Fund (IMF) estimated that the world economy grew by 3.5% last year, which was less than one percent above the projected rate before the war.

Can global growth now match the Fund’s 2.93% forecast for 2023?

The main threat is that the war will get worse and include nuclear weapons, which would hurt the global economy and peace.

The war’s effect on energy sources has driven investment in renewables, which are less likely to be affected by future geopolitical problems.

The International Energy Agency (IEA) predicts that a reduction in Russian oil exports will soon increase global demand for fossil fuels.