For those who experienced the upheavals of the global financial crisis of 2007-2008, terms such as soaring sovereign debt, defaults, liquidity problems and the balance of payments crisis sound familiar. Almost fourteen years after the worst economic recession engulfed the world, the debilitating, pernicious and devastating impact of Russia’s war against Ukraine and its deleterious impact on all areas of national economies has taken place. In the age of the pandemic where loss of life, capital and severe disruption to economic activity have become a recurring feature of global economies, the year 2022 brings with it much pessimism about resilience and the defiance.

The impending pessimism is reinforced by some startling numbers. A combination of production shocks to the Commonwealth of Independent States, Russia and Ukraine, for example, could cause global production to fall by 0.8% in 2022. Countries like Sri Lanka, which are experiencing huge political turmoil and are already saddled with pre-war sovereign debt in Ukraine will see the situation worsen. The impact will also be particularly severe on countries that have always relied on Russian crude oil to support their economies and generate industrial activity. This includes Germany and Austria, the former of which relies heavily on Russian gas to fuel its economy and drive export-led growth. The suspension of gas exports to countries such as Poland and Putin’s regime Bulgaria, however, could have devastating effects on countries that do not have strong resources or reserves such as Germany to offset aftershocks. In addition, the shortage of oil and gas reserves and the relentless struggle between Russia and NATO member states to impose and avoid sanctions mean that a secure supply chain remains elusive, putting pressure rising oil and natural gas prices. The spiral The effect of rising costs translates into increased socio-economic unrest, political instability and conditions conducive to regime change around the world.

However, the peak is not limited to natural gas or oil alone. Prices for products such as aluminium, titanium, cobalt and nickel have soared across Europe, many of which are essential raw materials for manufacturing, industries and machinery . For example, soaring prices of precious raw materials will directly impact the industrial capacity of various states which include industries such as automotive, shipping, and electronics. Although higher prices are benefiting exporters, given the lower supply and strong demand for expensive products, supply chains will inevitably be disrupted, especially in the context of the COVID-19 pandemic which has already caused high inflation, weak wage growth and widespread unemployment. Lowering prices, tackling enabling factors such as resource scarcity, or advancing fiscal and monetary policies that can resolve the balance of payments crisis and revive national economies will always prove to be a tedious and tedious task.

Therefore, a severe economic downturn that is palpable, unaffordable and imminent can only be resolved if economies change their initial energy sources and diversify their resource base. European states, for example, should switch to renewable energy, but such changes would also come at a high price. In the short term, countries should either seek out lucrative markets in the Middle East such as Qatar, the United Arab Emirates and Saudi Arabia to offset supply shocks from Russia, or focus on fuels such as coal, which will have a devastating impact on the climate. change due to C02 emissions. The effects of climate change are being felt in 2022, such as worsening drought in the Horn of Africa as well as widespread heat waves in South Asia, the Middle East and beyond. Costs associated with rising temperatures negatively impact agricultural production, hydropower and electricity generation as well as poverty reduction efforts.

Mass poverty in 2022 will also be exacerbated by an exodus of refugees from Ukraine that is already contributing to the otherwise debilitating effects of the 2015 migrant crisis that continues to haunt Europe today. The bombardment of countries such as Syria, Iraq and Afghanistan over the years has led to thousands of displaced citizens attempting to cross the Mediterranean for a better life. The same goes for Central American immigrants from Mexico, El Salvador, Honduras and Guatemala who relentlessly try to cross the US border into the United States for job prospects, security and better livelihoods. The 2015 refugee crisis had a significant impact on the faltering nature of national economies witnessed by countries around the world and the addition of Ukrainians as displaced persons only compounds the initial impact of refugees. which has been seriously observed in poorer countries like Jordan. , Pakistan and Uzbekistan. The absorptive capacity of governments and the inability to provide jobs for the incoming population can cause greater civil unrest and contribute to declining industrial productivity and dwindling resources. All of this has a negative impact on the global economy.

Clearly, then, the year 2022 holds bleak prospects for a pandemic-stricken, war-weary and largely destitute global population reeling from the aftershocks of the 2022 Ukraine war. Little could change if the war did not end with an eternal ceasefire.

The author is an associate research assistant at the Institute of Policy Research, Islamabad