Ukraine war rapidly worsening outlook of global economy: UNCTAD

The war is causing freight rate hikes as restrictive measures on airspace, contractor uncertainty and security concerns are complicating all trade routes going through Russia and Ukraine, the report says. The two countries are a key geographical component of the Eurasian Land Bridge.

In 2021, 1.5 million containers of cargo were shipped by rail west from China to Europe. If the volumes currently going by container rail were added to the Asia-Europe ocean freight demand, this would mean a 5 to 8 per cent increase in an already congested trade route.

"On top of this, already expensive and overstretched maritime trade will find it difficult to replace these suddenly unviable land and air routes," the report says. "The impact of the war in Ukraine can be expected to lead to even higher freight rates.” Such increases would have a significant impact on economies and households.

In 2021, UNCTAD simulated that the freight rate increase during the pandemic raised global consumer prices by 1.5 per cent, “with particularly oversized effects in vulnerable economies such as small island developing states, landlocked developing states and least developed countries”.

“The war in Ukraine has a huge cost in human suffering and is sending shocks through the world economy,” UNCTAD secretary-general Rebeca Grynspan said in a statement. “All these shocks threaten the gains made towards recovery from the COVID-19 pandemic and block the path towards sustainable development.”

The report also states that the war is causing concerns over the two fundamental ‘Fs’ of commodity markets – food and fuels.

The risk of civil unrest, food shortages and inflation-induced recessions also cannot be discounted, the report says, particularly given the fragile state of the global economy and the developing world due to the COVID-19 pandemic.

Fibre2Fashion News Desk (KD)