The war between Russia and Ukraine has had a significant impact on the world economy. The conflict has led to a decrease in trade between the two countries, as well as an increase in prices for goods and services. In addition, the war has resulted in a decline in investment and tourism, which have further contributed to the economic slowdown.
The war is still going on. This means that it is still impossible to say the final influence of the war on the world’s economic sector. As international political experts said, the impact will be higher and more damaging than it is now because the actions of Russia, specifically of its presidents, are unpredictable. As the war still is going on, today we will talk about the main changes in the international currency market and the global economic sector after activating the sanctions against Russia.
A Quick Overview Of The Economic Sanctions Against To Russia
The sanctions are to minimize the chances of helping the Russian economy which will be used for the war. The sanctions also aimed to pressure Russia into withdrawing its troops from Ukraine and complying with the terms of a peace agreement. The sanctions are designed to target Russian banks and energy companies and restrict their access to international financial markets.
The economic sanctions activated against Russia are as follows:
1) banning Russian banks from accessing international capital markets;
2) prohibiting the export of certain energy-related equipment and technology to Russia;
3) restricting imports of Russian arms and related materiel;
4) freezing the assets of certain Russian individuals and entities;
These sanctions caused a significant decrease in Russia’s GDP and an increase in inflation. Additionally, the value of the ruble fell sharply, making it difficult for Russians to purchase imported goods. In 2022, an estimated 20% of international companies left Russia because of sanctions. The result of this massive leaving was reducing the revenue by 20 billion USD.
How The War Influenced The Economic Sector Of The World
Before outlining economical results, it is important to note that this war damaged millions of people. They lost the main sources of revenue as well as jobs. The conflict has also led to a sharp increase in the price of oil and gas, which has hit consumers hard. It also raised problems in international trading and a number of associated risks on foreign currency exchanges. This accordingly changed global currency rates on the major currencies. As war still goes on, it is expected that the main changes in global prices are on their way.
Before the war of 2022, the international trading sector was highly dependent on imports from Russia. Dozens of countries were dependent on vital resources such as gas, electricity, wheat, oil, and others. This has had a major impact on the global economy, as Russia was a key player in international trade.
The Ukraine War in 2022 damaged the export and import sectors in the world. The war led to a decrease in demand for goods and services, as well as an increase in costs for businesses. This, in turn, led to a decrease in exports and imports, which damaged the global economy.
On the other hand, this war very damaged dozens of companies. Some of them closed their businesses completely whereas others were forced to be relocated from Russia, Ukraine, or Belarus. For those who stayed, the conflict has made it difficult for companies to operate in the country, as they face increased security risks and logistical challenges. This has all led to a sharp decline in foreign investment in Ukraine, which is likely to continue in the future.
This has all put downward pressure on the dollar. For involved countries, the Ukrainian hryvnia has plummeted in value, while the Russian ruble has risen. The war in Ukraine has had a destabilizing effect on the global currency markets too. This is because the conflict has led to a decrease in confidence in the Ukrainian economy, and this has caused investors to sell off their Ukrainian assets. The central bank of Ukraine has responded by raising interest rates, but this policy is not sustainable in the long term.
The USD has been depreciating in value since the outbreak of the war in Ukraine. This is due to a number of factors, including the increased demand for safe-haven assets such as gold and silver, and the decreased demand for riskier assets such as stocks and currencies.
The war in Ukraine has also led to an increase in geopolitical tensions, which has further contributed to the dollar’s depreciation. The best way to stabilize global currency markets would be for international organizations such as the IMF or World Bank to provide financial assistance to Ukraine so that it can stabilize the value of its currency.
