Militarization of the West, green energy boom and microchip shortage: analysts predict the consequences of the war in Ukraine

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The economic situation is worsening not only because of rising grain prices. According to UN estimates, the Russian-Ukrainian war threatens to increase prices for all food and energy resources and cause an overall deterioration of the financial situation around the world. In the worst-case scenario, a «cascade effect» is likely with each of those processes overlapping and reinforcing one another, primarily in the least economically well-off countries, already severely affected by the coronavirus pandemic. As a result, 1.7 billion people in 107 countries will face the threat of deteriorating quality of life, malnutrition and impoverishment.

The Organization for Economic Cooperation and Development (OECD) believes that the armed conflict will reduce global economic growth by more than 1 percentage point and increase consumer inflation by 2.5 percentage points. The World Bank cut its forecast for global GDP growth in 2022 from 4.1% to 3.2%, the International Monetary Fund from 4.4% to 3.6%. Since the fighting is still far from over, and more and more voices in Western capitals are being heard in favor of a full embargo on Russian oil and gas (restrictions have already been imposed on some categories of commodity exports), a global recession (a drop in the economy) cannot be ruled out. In the worst-case scenario, we will see stagflation as in the 1970s, when low or even negative growth rates accompanied high inflation.