The World Trade Organization (WTO) has lowered its global trade growth prediction for this year due to the Ukraine conflict.
The prior prediction of 4.7 percent growth has been lowered to 2.5 percent owing to “the impact of the war and related policies,” according to WTO Director-General Dr. Ngozi Okonjo-Iweala.
The cut is also tied to ongoing global supply chain issues that resulted from the outbreak.
“My concern is that we have a growing food catastrophe,” she added, adding that disruptions would make food more expensive.
Although Russia and Ukraine account for only about 2.5 percent of world merchandise exports, they are “very, very substantial in particular industries,” according to Dr Okonjo-Iweala.
“The first worry, of course, is for the people of Ukraine, who are being displaced [and] not having enough food to eat,” she said.
She added the global economy was “going to suffer some severe consequences”, and said poorer countries would particularly feel the impact of the shortages, and “the supply constraints on food”.
Following Russia’s invasion of Ukraine, several food items, notably wheat and corn, have been impacted.
Sunflower oil is in short supply in the EU, according to industry associations. According to S&P World, Ukraine accounts for 46.9% of global exports and Russia for 29.9 per cent, but with Ukraine’s ports closed, it is struggling to export.
“I’m truly worried about looming hunger, particularly in poor countries that can least afford it,” Dr Okonjo-Iweala warned.
Using Africa as an example, the former Nigerian finance minister stated that 35 of the 55 countries there purchased wheat and other crops from Russia and Ukraine, as well as 22 countries imported fertiliser.
“Work being done by the African Development Bank now shows that in many countries, food prices are rising by 20% to 50% already,” she said.
Dr. Okonjo-Iweala, on the other hand, expressed optimism that the supply issues might be resolved.
In the medium run, she believes that countries will “change our dietary choices” to eat more local food.
She went on to say that while Africa adapts to climate change, it is investing in “heat tolerant wheat and other crops.”
Amid concerns that the conflict and economic sanctions against Russia may cause supply interruptions, the cost of other commodities has risen to new highs.
Russia’s mining industry is crucial for numerous chemicals, including palladium, for which it produces 40% of the world’s supply. Palladium is a critical metal for carmakers.
Even before the war in Ukraine, the pandemic had created a supply-demand imbalance in many industries, driving up prices, and the International Monetary Fund has warned that high inflation may slow global economy this year.
“In the short to medium term, I think that we are going to see these inflationary pressures continue,” Dr Okonjo-Iweala said.
Many countries have used trade as a lever to put pressure on Russian President Vladimir Putin over his decision to invade Ukraine.
Ukraine has severed commercial connections with Russia and has led efforts for its suspension from the World Trade Organization (WTO) as a result of the conflict. No country, however, has ever been removed from the WTO, which the Director-General described as “not an easy thing to accomplish.”
Despite the fact that some of the world’s top trade attorneys disagree, she claims there is no mechanism to kick Russia out.
(Adapted from TheGuardian.com)