Thursday, 29 September, 2022

Global Economic Implications of Ukraine-Russia Crisis: Is Bangladesh An Outlier?

Kazi Asszad Hossan

Global Economic Implications of Ukraine-Russia Crisis: Is Bangladesh An Outlier?

Popular News

The Ukraine war and the consequent economic upheavals have jolted the global economy. The Ukraine war has not been confined to the strategic front, as it reverberated across the world through triggering inflation, disrupting Global Value Chain (GVC) and resulting in an unprecedented economic crisis. The war has dampened the recovery process of countries from the Covid-19 pandemic, and thus accentuating the plight of the general people. While all the regions have grappled with the repercussions of the war, Bangladesh remains an outlier owing to its robust economic vitality as well as the prudent macroeconomic management of the policymakers that averted an economic crisis. This adds to Bangladesh’s laudable success in warding off global crises—as had previously been evident in the country’s deft handling of Covid-19 induced crisis—bolstering the notion that Bangladesh’s economy remains resilient, despite a series of international economic whirlwind.

The Russian invasion of the Ukraine crisis was not solely limited to the economic sphere, as it is understandable that in a globalised world where the critical supply chain of countries are inextricably intertwined—which means that any remote upheaval at a far-flung country, inexorably impinges on the economy everywhere, ensuing devastating impacts for the global economy. In the similar vein, the Ukraine crisis had soon transcended the border and soon pervaded in the form of economic plight of the people across the world, especially, developing countries borne the brunt of the Ukraine crisis, as these countries, already battered by Covid-19 pandemic and afflicted by a slew of other predicaments, was ill-prepared to confront the disastrous supply-chain disruption that resulted in deplorable food insecurity.

Africa region had endured the most strenuous economic impact of the country, as countries of the region hinged on both Ukraine and Russia for their import. Thus, the sudden breakout of the war and consequent disruption of the commodities has halted the wheat import into the region, thus exposing the countries of the region to food insecurity. Besides, the ramifications of the ballooning oil price had knock-on effects on the price of other daily commodities, thus escalating the inflation of the region, which is already grappling with an economic imbroglio resulting from the Covid-19. Furthermore, a prolonged war in Ukraine, paints a bleak future for the region’s macro-economic sustainability, putting at risk the economic recovery of the countries from the gloomy COVID-19 period, perpetuating the economic woes of African people.

The developed countries were not also immune to the disastrous upheaval triggered by the war. Europe, with its over-reliance on Russia for the import of gas and oil—had endured the most appalling economic setback due to the war. The Ukraine-Russia war had sent shockwaves through the arteries of the European economy, eroding consumer confidence, imperiling the supply of the gas in the imminent winter season. Although European countries—e.g. the United Kingdom and Germany—had forged with the United States and other NATO countries in collective imposition of the sanction on Russia, nonetheless the commodities in which Europe relies on Russia e.g. gas and oil , were outside of the remit of sanctions. However, this failed to avert a full-blown supply crisis—as production of both oil and gas had diminished due to the war.

The South Asia region has also confronted a string of economic shocks in the past two years, even as the effects of COVID-19 pandemic lingers. The escalating oil and food price has a detrimental impact on peoples’ real income. Besides, the crumbling fiscal situation in some countries has further exacerbated the toll incurred by the Ukraine crisis—precipitating economic meltdown.

The economic toll inflicted by COVID-19 pandemic is palpable, as more than 100 countries of the world have sought assistance from the International Monetary Fund (IMF)’s emergency fund to confront the economic headwind. The global economic condition appears dismal, with diminishing per capita income and ballooning budget deficit and debts, which is redolent of the 2009 international financial meltdown, as the IMF prognosticate 3% contraction of the global economy, which is starkly juxtaposed with rosy economic projection of 3.3% rise in global GDP in 2020, implying much change in the world economy in the intervening period.

However, amidst this gloomy economic situation, Bangladesh stands as a baffling aberration amongst a bewildering array of embattled world economies. The economy of the country is not only confronted the COVID-19 pandemic, but also the economy fared well in the face of the Ukraine crisis, as far from the bleak global turbulence, Bangladesh’s economy stands buoyant, offering sustenance and sustainable livelihood to its mammoth population. Despite recurring forecasts of an imminent economic breakdown by certain quarters, the economy of the country proved resilient in the face of mounting challenges.

Bangladesh’s vigorous economic performance and robust growth was bolstered by a swift rebound of the service and manufacturing sector. The economy is poised to retain robustness in the medium term. Nevertheless, the worldwide supply chain disruption had stoked inflation in the country, which stood at 7.2 percent in February 2022, driven mainly by food and non-food prices. This rate, however, pales in comparison with other countries that are reeling from galloping inflation and economic turmoil. This escalating inflation might follow current account deficit; however, Bangladesh should not be dismayed by fleeting headwinds, as the country's foreign reserve volume remains robust at $39 billion, thus assuaging undue fear about economic crisis. However, the challenges to the country’s economy still looms large, given its imminent graduation from LDC status, and accompanying forfeiture of LDC-specific privileges. However, predicated on a prudent macroeconomic footing, the economy is poised to fare well surmounting the momentary hiccups, thus cementing its economic resilience in a world afflicted with economic malaise.

Moreover, as the countries across the world reeling from the economic setbacks, Bangladesh is an astounding outlier amongst global economies as the country has weathered the tumultuous period of global uncertainty. The performance of the country in battling COVID and subsequent challenges and undertaking the road of recovery has been touted by the international community and is exemplary for other economies. Moreover, in the era of pervading economic gloom, Bangladesh reassures the economists that domestic economic potential coupled with prudent economic management can endure formidable economic predicaments.


The writer is a development researcher