How big is the impact of the Russia-Ukraine war on the global economy, and could it lead to a global recession? Beyond the suffering and humanitarian crisis from Russia’s invasion of Ukraine, the entire global economy will feel the effects of slower growth and faster inflation. In the midst of the war between Russia and Ukraine, there is also concern about the economy around the world, despite the war, this year the global economy will be on the path of progress. However, he also says that the impact of the war will be felt in every corner of the world. But how bad the effect will depend on how long the war lasts, the turmoil that the global market is going through now is a matter of time or its effect will belong.

1 Impact on oil prices

Another very important factor is the oil prices in the market, which are already rising due to the war. According to the US Energy Information Administration, Russia ranks third in the world in terms of crude oil production after the US and Saudi Arabia.

In the year 2020, Russia produced 10.5 million barrels of oil per day. Of this, it exported 50 to 60 million barrels of oil, half of which were only exported to Europe. On March 7, the prices of Brent oil (crude oil extracted from the North Sea area) recorded a record increase amid fears of a possible stop by the US and Europe on Russia's oil exports.

Last week, a jump of 21 percent was seen in its prices in the international market, after which it increased by another 18 percent and decreased slightly and reached $140 per barrel. On March 8, the US imposed sanctions on the purchase of oil from Russia and Britain said that before the end of the year 2022, it would completely stop buying oil from Russia. Rob West, head of research company Thunder Sed Energy, told the Financial Times: "The current situation could lead to crude oil prices reaching $200 a barrel."

However, on March 8, Russian Deputy Prime Minister Alexander Novak went a step further, saying that "crude oil prices could rise unexpectedly. They could reach at least $300 a barrel."

In a message broadcast on state television, Novak said "it is clear that stopping the purchase of oil from Russia will have a terrible impact on the international market."

2 Effect on 'Stagflation' 

Due to the rise in crude oil prices, not only does the prices of diesel, petrol, or gas increase but the price of everything needed increases with it. Fuel is used for production and to move goods from one place to another, so oil prices are directly related to inflation. Economists at Barclays Bank say that this threatens to increase stagflation. Barclays has already cut its forecast for this year's global economic growth by one percent.

Stagflation is a situation when inflation rises continuously and the economy comes to a standstill, that is, the growth of the economy slows down and unemployment increases. You can say that when inflation rises and GDP starts decreasing at the same time, then that situation is called stagflation.

3 Food  Sources, GETTY IMAGES

The effect of war can also affect the prices of food items, that is because both Russia and Ukraine are ahead in terms of agricultural products. According to Wendil Shilobo, senior researcher in agricultural economics at Stellenbosch University and JP Morgan, Russia and Ukraine account for 14 percent of the world's wheat production, and these two countries account for 29 percent of the global wheat market. Both these countries are also ahead in the production of corn and sunflower oil.

If exports from here are disrupted, it will affect the Middle East, Africa, and Turkey. Lebanon, Egypt, and Turkey buy the bulk of their wheat requirements from Russia or Ukraine. Apart from these, Sudan, Nigeria, Tanzania, Algeria, Kenya, and South Africa also depend on these two countries for their grain needs.

"The question for me is not whether there can be a global food crisis, the question for me is how big will this crisis be," says Sven Torre Holsather, head of Yara, one of the world's largest fertilizer companies. Fertilizer prices have already increased due to crude oil prices. Russia is also one of the largest exporters of fertilizers in the world. "In this matter, we are in a difficult situation even before the war. One of the main reasons why half of the world's population is getting grain is manure. If you remove manure from agriculture, agricultural production will be reduced to half."

4 Interest rates may rise

Jennifer McKeown, head of Capital Economics' Global Economics Service, says that due to rising fuel and food prices, inflation in the economy of many developing countries will increase by at least one percent. In some countries of Central Europe and Latin America, already struggling with inflation, the central bank may adopt the path of increasing interest rates to keep inflation under control. Jennifer McKeown told the BBC, "If this happens, it will be like increasing the burden on the economy." Meanwhile, it can be assumed that in some parts of Eastern Europe, countries like Germany, Italy, and Turkey, which are heavily dependent on crude oil from Russia, things will become more expensive for the people there.

5 Consumer demand

Asian economies will not be able to escape the impact on the purchasing power of consumers globally. “I think if consumer demand and export demand are impacted, Asia will also be affected. Predict that the global economy will look to grow further this year. One reason for this is that the economies recovering from the crisis caused by the Corona epidemic are trying to reach the level before the epidemic this year. A return to normalcy would be a "good effect" on the growth of the economy.

Apprehensions are being expressed about the pace of development due to war, but its effect largely depends on how long the war continues and how much things get worse. "It is not as if there is a risk of the global economy going into recession or any such thing." However, Ben admits that the current situation "generally creates uncertainty" and that no one knows for sure how much the situation may worsen.