Daily Times

The Russia-Ukraine conflict is worsening the outlook for the world economy as rising food, fuel and fertiliser prices become “alarming” for developing nations particularly, the UN Conference on Trade and Development (Unctad) has said.

Developing countries – which are already affected by the Covid-19 pandemic, rising debt levels and climate change – will be hit the hardest by disruptions in food, fuel and finance, the agency said in a report that evaluates the impact of war on trade.

The share of agro-food commodities’ imports of Pakistan from Russia is 2.6 percent and 1.9 percent from Ukraine. About 26 African countries, including some least-developed ones, import more than a third of their wheat from the two nations at war, the report said. For 17 of these African countries, the share of imports is more than half. On average, more than 5 percent of the world’s poorest countries’ import basket is composed of products whose prices are expected to increase due to the Russia-Ukraine war, Unctad calculations showed. The share is below 1 per cent for richer countries. “Soaring food and fuel prices will affect the most vulnerable in developing countries, putting pressure on the poorest households which spend the highest share of their income on food, resulting in hardship and hunger,” Unctad secretary general Rebeca Grynspan said. This is cause for great concern as social and political stability and increasing food prices are highly correlated, he added.

Russia and Ukraine are major players in the global agricultural commodity markets, representing 53 percent of the global trade of sunflower oil and seed trade and 27 percent of wheat trade worldwide, said Unctad.

“Agrifood commodity cycles have coincided with major political events, such as the 2007-2008 food riots and the Arab Spring,” Unctad said.

The conflict could also drive up cargo rates, which were already elevated as a result of the pandemic, the UN agency warned. “Such increases would have a significant impact on economies and households,” the report said. Restrictive measures on airspace and security concerns are complicating all trade routes going through Russia and Ukraine, it said. Global air freight capacity will be further constrained and air cargo prices are set to rise as airlines are forced to take longer routes and spend more money on fuel. The already expensive and overstretched maritime trade will find it difficult to replace these suddenly unviable land and air routes, the agency said. Unctad’s rapid assessment of the war’s impact beyond the humanitarian crisis in Ukraine shows heightened financial volatility, sustainable development divestment, complex global supply chain reconfigurations and mounting trade costs. The combination of high food and fuel prices and macroeconomic tightening will place severe pressure on households in developing countries: real incomes will be squeezed and economic growth will be constrained, the UN body said.