Risks from the Russian invasion resonate in the global economy

Russian President Vladimir Putin’s war in Ukraine and the fierce financial retaliation it provoked have not only caused an economic catastrophe in Russia. The fallout also threatens the global economy, rattling financial markets and making life more dangerous for everyone from Uzbek migrants to European consumers and starving Yemeni families.

Even before Putin’s troops invaded Ukraine, the global economy was dealing with several problems: rising inflation, supply chain problems, declining stock markets. The Ukraine crisis magnified all those threats and complicated possible solutions.

“We’re actually in uncharted territorysaid Clay Lowery, executive vice president at the Institute of International Finance, an industry group for global banks. “We know there are consequences we can’t predict”.

For now at least, the damage to the global economy seems relatively small, if only because Russia and Ukraine are not major economic powers. Despite their importance as exporters of energy, precious metals, wheat and other raw materials, the two together account for less than 2% of the Gross Domestic Product (GDP).

Most major economies have limited reliance on trade with Russia. For the United States it is 0.5% of total trade, for China around 2.4%.

Unless there is a great escalation of the war -which is certainly not impossible-“the effects on the US, China and most of the emerging world should be limitedsaid Adam Slater, chief economist at Oxford Economics. I was expecting a 0.2% decline in global GDP this year.

Still, Russia is a major supplier of oil, natural gas, and metals, and higher prices for those products will cause economic damage in different parts of the world.

Europe depends on Russia for nearly 40% of its natural gas and 25% of its oil. For the European continent, the Russian war greatly increased the chances of runaway inflation, another economic crisis, or both.