Thereby, the decrease in the supply of basic raw materials and energy products will lead to a recession in the manufacturing industries, such as the automotive industry or electronic components industry. The invasion changed everything, because it led to a massive shock on the supply, which led to a multiple channel transmission and to the permanentization of effects. Those factors were considered as being temporary, likely to disappear once things stabilized and the production chains returned to normality. Those goods accounted for a good percentage of the exports of Russia and Ukraine, and the war led to an increase in the world prices for those goods.īefore the invasion, some economists announced about the risk of this stagflation, because of the price increase and the volatility of the world economic activity caused by the COVID-19 pandemic, climate change and the major ongoing restructuring in the world economy. This economic shock was strong enough to impact the demand in different sectors: fossil energy (oil, gas and coal), food (corn), chemical fertilizers (based on potassium and nitrogen) and industrial raw materials (nickel, titanium). When Ukraine was invaded by the Russian army, the world’s economy was already in a huge stagflation, not comparable to the one from 1973-1974.
Even though it is too early to see the end of this war, some economic consequences are already visible. The Western world’s reaction was to apply severe economic sanctions, to impose penalties, mainly as deterrence. The longer the conflict lasts, the larger the threats to world peace will become. The Russian invasion in Ukraine marked a new war in Europe, which started four months ago and whose end is not yet in sight.
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