The world economy has only just recovered from the pandemic, and now Russia’s war of aggression is once again a big shock – the biggest blow hits the poor

This year was to be a time of recovery from the coronavirus pandemic and economic growth.

It happened differently. As a result of the Russian invasion war, the outlook for the world economy has deteriorated and concerns about rising prices are growing.

So there is another shock at hand, when we only had time to recover from the previous one. It is hitting emerging and emerging economies hard, where recovery from the economic shock caused by the coronavirus pandemic has been slower than in industrialized countries.

Senior Economist at the Bank of Finland Heli Simolan according to him, the effects of war are felt in emerging and emerging economies mainly through two channels. These are food prices and energy prices. Both are on the rise because of the war.

– In countries that import both energy and food, the effects are the worst.

On the other hand, emerging and emerging economies, which are exporters of energy or cereals in particular, are doing better and may even benefit from rising prices. Brazil, Indonesia and Nigeria, for example, are oil exporters and Argentina is a major exporter of grain.

World economic growth will be cut by more than one percentage point this year as a result of the Russian invasion war, the OECD said in March.in its outsourced forecast (you switch to another service). According to the OECD, the general rise in prices, or inflation, will rise by about 2.5 percentage points due to the war.

Even before the Russian invasion war, there has been a lot of talk in Finland about inflation and how it punishes the lives of ordinary people. For example, when food prices go up, there is less money left for other things.

High inflation is causing the biggest problems, especially in poor countries and poor households, where money goes relatively most to food and energy bills. When both are on the rise, extreme poverty can increase in places, says Heli Simola.

The International Monetary Fund has said its economic growth forecast will be revised downwards. The IMF will release its next forecast next month.

He – like many other decision-makers and experts – is particularly concerned about developing countries that import a lot of food, fertilizer and energy from Russia and Ukraine.

Russia and Ukraine play an important role in the world market, especially as cereal producers. For example, Turkey and Egypt are major importers of Russian and Ukrainian wheat.

In some poor countries, such as Somalia, all imported wheat comes from Ukraine and Russia, according to UNCTAD statistics.

Now grain deliveries are badly disrupted and because of the war, next summer’s harvest is also under threat. World food security is at stake and there are fears that food shortages and high prices will create new conflicts.

The OECD has recommended that countries mitigate the impact of rising prices with various support packages targeted at the most vulnerable. The only problem is that in many developing countries there is little room for economic policy room for any kind of support measures.

– In many developing countries, debt levels have risen to very high levels, making it more difficult to use public sector support measures, Simola says.

Western monetary policy is expected to tighten this year after a long period of zero interest rates. Rising interest rates in the United States in particular are causing difficulties for the debt situation in developing countries. As a result, developing countries may leave the capital and their exchange rates will weaken, Simola says.

– Especially in countries with a high level of foreign debt, the depreciation of the exchange rate increases the cost of debt and further complicates the situation.

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