Energy, agriculture, inflation, poverty… The war in Ukraine will also have serious consequences for Eastern Europe and the world, and a slowdown in global growth is likely, explains Beata Javorczyk, head of the European Development Bank (EBRD), to Agence France Presse.
How much will the restoration of Ukraine cost?
“It will depend on the duration of the war (which has been going on for three weeks). A significant part of the country is working – infrastructure, banking system, businesses are still open. The $100 billion figure comes from the government of Ukraine (…) and corresponds to the cost of infrastructure and buildings already destroyed. This is equivalent to two thirds of GDP. This shows that the economic costs will be significant, even if it is too early to provide figures. (According to IMF estimates, Ukraine’s GDP will decline by at least about 10% in 2022, ed.).
How much the conflict will slow down the development of Ukraine will depend on the stability of the country and, consequently, on the agreement reached to resolve the conflict. As well as assistance and investments from other countries. Ukraine has a free trade agreement with the European Union. This means that Ukraine has access to the (huge) European market. The EBRD (which provided €2 billion in emergency assistance to Ukraine) can also play a role in co-investing in the private sector. We serve as a seal of verification. »
What will be the impact of the influx of refugees into neighboring countries?
“If the conflict continues, the number of refugees could reach six million people. It is huge and difficult to manage for the host countries. But in early autumn, labor markets in Central Europe were seething due to very low unemployment rates (which may have contributed to the integration of Ukrainian refugees). »
How will the sanctions affect Russia?
“There are two aspects of sanctions. Short-term costs associated with the loss of international trade, the loss of consumer confidence, the depreciation of the ruble … etc. If, after the end of the conflict, Russia is perceived as a risky destination, if there are nationalizations – we have heard statements (from Russian President) Vladimir Putin – this will damage Russia’s reputation as a destination for investment. If sanctions on the export of high-tech products continue, access to the knowledge that comes from these products will be lost, and this may lead to a reduction in the movement of scientists and students to and from Russia. »
What will be the impact on the global economy?
“This conflict will reverberate throughout the world, and its consequences will be felt not only this year, but also next year. Russia and Ukraine account for 30% of world wheat exports. Ukrainian farmers have not yet sold last year’s harvest. Supplies across the Black Sea have been disrupted, and most importantly, Ukrainian farmers still do not sow. In addition, Russia and Belarus are producers of ammonia and potassium, which are part of fertilizers. Thus, fertilizer prices are rising, affecting farmers in Asia and the US.
Nickel, copper, platinum, palladium exported from the region are components used in renewable energy sources. (They have seen their prices skyrocket since the conflict began over supply risks, editor’s note). Gas prices are at record levels in Europe and oil prices are very high, making coal relatively cheap and thus incentives to phase out (this most polluting fuel) could be reduced.
All this will accelerate inflation with more serious consequences for the poorest countries, which will affect poverty and political stability. Rising inflation will also force central banks to respond by raising interest rates (as some have already begun to do), which is bad for global economic growth. Probably slowdown. »