GENEVA: The war in Ukraine has sent commodity prices soaring, creating fresh shock waves across poorer countries already hard-hit by the pandemic, the UN said Thursday, warning that “profound social anxiety” was spreading.
In a new report, the UN trade, investment and development agency (UNCTAD) warned that the conflict raging in Ukraine was causing a global economic slowdown that was hitting developing countries the hardest.
UNCTAD chief Rebeca Grynspan demanded a coordinated international response to help poorer countries weather the crisis, stressing to journalists that “urgency is of the essence”.
“Many developing countries have struggled to gain economic traction coming out of the Covid-19 recession and are now facing strong headwinds from the war,” she said.
“Whether this leads to unrest or not, a profound social anxiety is already spreading.”
Ukraine and Russia are among the biggest exporters of farm-grown foodstuffs and fertilisers, notably of wheat, maize, rapeseed, sunflower seeds and sunflower oil.
With Ukraine’s access to its ports cut off by the Russian invasion, and Russia increasingly isolated from export markets and its entire economy under sanctions pressure, those supplies are shrinking fast, spurring surging prices.
The UN says global grain prices have already risen past the level they were at during the Arab Spring uprisings in 2011.
And UN chief Antonio Guterres warned late last month that the conflict could reverberate far beyond Ukraine, causing a “hurricane of hunger and a meltdown of the global food system”.
UNCTAD stressed that many developing countries had already been struggling to service surging debt levels amid their response to the Covid crisis.
This combined with weakening global demand and insufficient policy coordination at the international level, it warned, could “generate financial shockwaves that can push some developing countries into a downward spiral of insolvency, recession and arrested development.”
“The economic effects of the Ukraine war will compound the ongoing economic slowdown globally and weaken the recovery from the Covid-19 pandemic,” Grynspan said.
Richard Kozul-Wright, head of UNCTAD’s globalisation and development strategies division, agreed.
The current crisis, he told reporters, “in many respects, feels even more threatening to many developing countries than the Covid crisis, because it is hitting on so many fronts.”
Developing countries are not the only ones feeling the pain. In its report, UNCTAD lowered its global economic growth estimates for 2022 to just 2.6 percent from the 3.6 percent forecast in September.
Russia, which has been hit with crippling sanctions over the invasion of its pro-Western neighbour, is expected to plunge into a deep recession this year, while “significant slowdowns” are expected in parts of Western Europe and Asia, UNCTAD said.
The report also cautioned that many advanced economies were on course to reverse the stimulus packages implemented in response to the pandemic and were tightening interest rates.
“This is happening even though inflation has not yet led to sustained wage growth, making the threat of wage-price spirals unfounded,” UNCTAD said.
Such shifts will weaken global demand and dampen growth, with investment already stalling in some countries, it said, warning “this is the wrong policy trend at the wrong time.”
Instead, the agency said policies should focus on actions that would protect the global economy, including offering “immediate debt relief for Ukraine.”
It also called for providing “more concessional and less conditional multilateral financial support for developing countries”.
“The global economy is, literally and metaphorically, staring down the barrel of a gun,” the report said.
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