A financial expert outlines the expected economic effects of the war in Ukraine
Financial expert and tax agent, Mohamed Helmy, identified five main expected effects of the war in Ukraine, the most important of which are inflation, and the negative impact on energy supplies.
He told "Emirates Today" that there are economic effects that would cause concern, not only in Europe, but also globally, starting with its impact on the energy, grain and stock markets.
Rising Inflation
Helmy pointed out that inflation has reached its highest levels in several decades, and there are likely increases in interest rates, noting that US interest rates are still hovering near the 2% level.
He added: “The world usually sees when major crises occur, investors rush to return to credit bonds, which are generally seen as the safest assets, and this time may also happen, even if the Russian invasion of Ukraine risks increasing oil prices, and thus increasing inflation. ».
He stressed that gold, which is also seen as a "haven" in times of conflict, or economic strife, reached a peak in prices two months ago.
grain flow
Helmy continued: “The interruption of the flow of grain from the Black Sea region could significantly affect prices, and add more food price inflation globally, at a time when affordability is a major concern worldwide, in the wake of the economic damage caused. about the COVID-19 pandemic.
He pointed out that four main exporters: Ukraine, Russia, Kazakhstan, and Romania, who ship grain from ports in the Black Sea, are facing disruptions due to military actions and sanctions.
wheat and corn
According to data from the International Grain Council, Ukraine is expected to be the third largest exporter of corn in the world in the “2021/2022” season, and the fourth largest exporter of wheat, while Russia is the largest exporter of wheat in the world.
energy prices
Helmy pointed out that Europe relies on Russia to obtain about 35% of its natural gas, most of which comes through pipelines that cross Belarus and Poland to Germany, as well as the Nord Stream pipeline that goes directly to Germany and others through Ukraine. Which may indicate a decline in natural gas exports from Russia to Western Europe as a result of the imposition of sanctions.
Helmy believed that these tensions risk a "material rise" in oil prices, the stock market, and the financial sector.
The intricacies of sanctions
He said that the sanctions imposed by the United States and European countries on Russia could add more economic complications, as it would exacerbate sales in the Russian markets, increase the cost of borrowing in the country, and damage the value of the Russian currency, which raises the Russian domestic political costs as a result of the war in Russia. Ukraine.
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