The war in Ukraine is "a catastrophe" for the world which will cut global economic growth, the president of the World Bank has told the BBC. "The war in Ukraine comes at a bad time for the world because inflation was already rising," said David Malpass. Malpass said the economic impact of the war stretches beyond Ukraine's borders, and the rises in global energy prices in particular "hit the poor the most, as does inflation". Food prices have also been pushed up by the war, and "are a very real consideration and problem for people in poor countries''.
Ukraine is the world's biggest producer of sunflower oil, with Russia number two, according to S&P Global Platts. Russian supplies of these commodities are being restricted because of the widespread sanctions which make it hard for the rest of the world to buy its products. "There's no way to adjust quickly enough to the loss of supply from Ukraine and from Russia, and so that adds to prices," said Malpass. He says the same is true of Russian energy supplies, and it is particularly damaging for western Europe, where governments have "neglected other aspects of how to have enough electricity".
Such a loss of income is just one way this war will dent living standards in Russia, so too will the fall in the value of the ruble and the inflation that brings. The World Bank has committed $7.9bn to help develop Ukraine's economy since the 2014 revolution. That money has helped the country institute wide-ranging economic reforms including privatisations in the energy and banking sectors, as well as efforts to make its farmland more productive.
Less than a month before the Russian invasion Ukraine's independent central bank forecast that the $180bn economy would grow 3.4% this year, after the difficulties of the pandemic. However, war means "a catastrophic impact for our economy, for the region overall", according to Alexander Rodnyansky, who is an economic adviser to President Zelensky. With hundreds of thousands of Ukrainians fleeing the country or joining the fight against Russia the workforce has shrunk dramatically, which is making it difficult to keep the wartime economy going.
"Production is just collapsing", says Rodnyansky, who says there are disruptions to vital food and energy supplies. A surge of foreign investment in recent years helped to reshape the Ukrainian economy amid a corruption crackdown that was part of a deal for development support from the International Monetary Fund and World Bank. Malpass is concerned that the war will do long-term damage to those changes that Ukraine's economy and people have benefited from. "It will help fund the budget of Ukraine," said Malpass.
The warnings by Malpass came as the British Chambers of Commerce (BCC) cut its growth forecast for the UK's economy, amid soaring inflation, tax rises, and global shocks including Russia's invasion of Ukraine.