The war between Russia and Ukraine continues to create disruption and economic insecurity. Supply chains are suffering, commercial credit is inevitably affected, and the consequences are rippling throughout the global economy. Uncertainty surrounding the ongoing conflict has many wondering how to manage the financial fallout.
More supply chain chaos
Russia and Ukraine account for over a fourth of the world’s wheat exports. Ukraine is a major food exporter by itself, and the war is having significant consequences for food supplies in Europe, much of the Middle East, and Africa. Rising prices and food insecurity pose substantial risks as the conflict continues.
Ukraine also exports a variety of raw materials, including metals and minerals essential to global manufacturing, and with Russia’s invasion hindering exports — and the drop in value of Ukrainian currency — prices for Ukrainian goods continue to rise.
Russia exports raw materials necessary to electronics production and is a global leader in the production of oil and natural gas. Import bans on Russian products are contributing to a sharp rise in fuel prices around the world.
War is adding to global economic uncertainty, and supply chains are suffering across the board.
The Russia-Ukraine war is a humanitarian crisis with devastating consequences for human rights and global economic instability.
Supply chains do not exist in a vacuum. When one link is broken, others are sure to follow. Consider how many electronics devices the average person uses each day, most of which are manufactured with copper, in relation to Russia’s control of one-tenth of the world’s copper reserves. Sanctions, including massive restrictions on Russian oil and natural gas, are contributing to political tension and rising fuel prices, with repercussions for energy and transportation.
Food exports, from both Ukraine and Russia, are down, and food insecurity on top of labor and supply shortages leads to a general drop in productivity and an increasing risk of poverty while food prices continue to rise. With essential products and supplies growing more expensive, global economic uncertainty is also on the rise.
Supply chain disruptions have had a relentless impact on business revenue for more than two years, so the conflict in Europe is exacerbating the challenges of an already tenuous global economy. With existing economic instability extending into its third year, the Russia-Ukraine war is driving inflation even higher and fueling speculation about impending recession. All these issues combine to create an uncertain outlook for commercial credit in the second half of 2022.