The International Monetary Fund (IMF) said the ongoing war between Russia and Ukraine may "fundamentally alter" the political and economic order globally.
"The war may fundamentally alter the global economic and geopolitical order should energy trade shift, supply chains reconfigure, payment networks fragment and countries rethink reserve currency holdings," the IMF posted on its website on March 15.
The IMF, which consists of 190 member countries, added that the ongoing conflict between Ukraine and Russia "is a major blow to the global economy that will hurt growth and raise prices." It cited the spike in food and energy prices, which fuels inflation and erodes the value of incomes.
It also mentioned that the conflict is "disrupting trade, supply chains and remittances in [other] countries." The IMF furthermore warned that the war is "eroding business confidence and triggering uncertainty among investors." This results in a domino effect that threatens to "depress asset prices, tighten financial conditions and [possibly] trigger capital outflows from emerging markets." (Related: Global markets in state of chaos due to Russia-Ukraine War.)
IMF officials earlier said they expect to lower the previous global economic growth forecast for 2022, currently at 4.4 percent. Regional growth forecasts would also be lowered, as per the March 15 post. The updated forecasts are due for release on April 19.
According to the IMF, Ukraine and Russia are likely to experience deep recessions. Countries in the Caucasus and Central Asia with close economic links to Russia would bear the heavier brunt of sanctions. Eastern Europe would also see higher financing costs, the institution added.
Meanwhile, the Americas are likely to see higher prices for food and energy – exacerbating inflation in Latin America, the U.S. and the Caribbean. Food insecurity has also been projected to increase in parts of Africa and the Middle East. Southeast Asia, India and some Pacific countries that import oil ought to brace for energy prices, the IMF added.
Tighter food supply reflects repercussions of Ukraine conflict
As the war between Russia and Ukraine rages on, the rest of the world faces a dwindling food supply. Export bans on certain food products – such as wheat and sunflower oil – have only served to limit supplies, increasing the prices of available stocks as a result.
On March 9, the Ukrainian government issued an export ban on different food products to address the "humanitarian crisis" in the besieged country. Wheat, oats, millet, buckwheat, sugar, live cattle and meat were among the foods prohibited for export under the emergency order. Ukrainian Agrarian Policy and Food Minister Roman Leshchenko defended the measure as necessary to "meet the needs of the population in critical food products."
According to the Associated Press (AP), Russia and Ukraine together supply almost a third of the world's wheat and barley exports. These raw materials processed into bread, noodles and animal feed worldwide "have soared in price" since Russia invaded its western neighbor, added the AP.
Aside from wheat, the Russia-Ukraine conflict also impacted the price of sunflower oil. Both countries account for 80 percent of the world's sunflower oil exports, according to Fox Business.
FEDIOL, the European Union's vegetable oil industry group, said in a March 4 statement that the region is facing a shortage of the food product. EU refineries source 35 to 45 percent of their sunflower oil from Ukraine, but the conflict threatens future supplies.
According to FEDIOL, available sunflower oil stocks in the EU are good for four to six weeks. "Beyond that period, it is likely that lack of availability of crude sunflower seed oil and limited alternatives will lead to a shortfall … [that] will be felt up to the consumer level," added the industry group.
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