The Banking Executive Magazine - April 2022 Issue

Who Owns World Resources? Beyond global spill-overs, countries with direct trade, tourism, and finan- cial exposures will feel additional pressures. Economies reliant on oil imports will see wider fiscal and trade deficits and more inflation pres- sure, though some exporters such as those in the Middle East and Africa may benefit from higher prices. Steeper price increases for food and fuel may spur a greater risk of unrest in some regions, from Sub-Saharan Africa and Latin America to the Cau- casus and Central Asia, while food insecurity is likely to further increase in parts of Africa and the Middle East. IMF is revising its growth forecasts. On the longer term, the war may fun- damentally alter the global economic and geopolitical order should energy trade shift, supply chains reconfig- ure, payment networks fragment, and countries rethink reserve cur- rency holdings. Increased geopoliti- cal tension further raises risks of economic fragmentation, especially for trade and technology. UNCTAD Impact Analysis UNCTAD’s rapid assessment of the war’s impact on trade and develop- ment shows a rapidly worsening out- look for the world economy, with the situation especially alarming for African and least developed coun- tries. UNCTAD report published in March 2022 also shows heightened finan- cial volatility, sustainable develop- ment divestment, complex global supply chain reconfigurations and mounting trade costs. Concern are revolving over the two fundamental “Fs” of commodity mar- kets – food and fuels. Ukraine and Russia are global players in agri-food markets, representing 53% of global trade in sunflower oil and seeds and 27% in wheat. This rapidly evolving situation is es- pecially alarming for developing na- tions. As many as 25 African coun- tries, including many least developed countries, import more than one third of their wheat from the two countries at war. For 15 of them, the share is over half. Soaring food and fuel prices will affect the most vul- nerable in developing countries, put- ting pressure on the poorest households which spend the highest share of their income on food, result- ing in hardship and hunger. According to UNCTAD calculations, on average, more than 5% of the poorest countries’ import basket is composed of the products that are likely to face a price hike due to the war. The share is below 1% for richer countries. The risk of civil unrest, food short- ages and inflation-induced reces- sions cannot be discounted, particularly given the fragile state of the global economy and the devel- the BANKING EXECUTIVE 18 ISSUE 160 APRIL 2022 Figure 1: Increasing prices of Oil, Gas, Wheat, and Metals (Source: Bloomberg, USDA, Datastream, IMF)