"Weak growth, rising prices" What military invasion brings to the world economy March 30, 15:56

“The economic downturn causes the business performance of the employer to decline, and salaries do not rise. Nevertheless, the price of food and other products does not stop rising.”

This is a phenomenon called “stagflation” in which economic stagnation and inflation occur at the same time. ..

In fact, it happened in Japan and the United States during the 1970s oil crisis.

It's something that governments and central banks want to avoid, but a month has passed since Russia's military invasion of Ukraine began, and voices are slowly beginning to warn of this situation over the increasingly uncertain world economy. ..

(Washington Branch, Yosuke Yoshitake)

“Boomerang inflation”

"Russia is the main producer of this steel," said

Bob Ross, CEO of the factory in Michigan, Midwestern United States, on March 14th.

It manufactures transformers to be delivered to automobile factories such as GM = General Motors, but some of them use Russian steel.

Prices have risen by as much as 30% compared to a month ago, due to caution that supply from Russia, which has been subject to economic sanctions, will decline.

For the past year, I have been covering the scene of inflation in the United States, but when I learned that Russian raw materials are also used in the American manufacturing industry, the world's supply chain = normalization of the supply network, which was greatly confused by the corona disaster, I had an unpleasant feeling that it would be delayed and affect prices.

Inflation is accelerating around the world as a result of the military invasion.

This is because Russia and Ukraine are sources of various resources and food.

The rise in crude oil and natural gas is a symbol of this, but according to an analysis by the OECD (Organization for Economic Co-operation and Development), wheat increased by 88% and corn increased by 42% after the military invasion.

Nickel has risen by 63%, palladium by 34%, and aluminum by 17%, and the prices of widely used raw materials such as semiconductors, automobiles, and aircraft have risen significantly.

The trouble is that global inflation was already at record levels before the military invasion.

The aim of "one of the largest ever" economic sanctions by Europe and the United States is to seriously damage the Russian economy.

The effect is already appearing in Russia due to the depreciation of the currency ruble.

On the other hand, the tighter Russia is tightened, the more it will have the effect of rebounding like a "boomeran" in each country.

US President Joe Biden said on March 8 that he announced an embargo on Russian crude oil, "it is not without sacrifices in the United States."

It means that even if you are prepared for a certain "boomerang effect", you must take a strict attitude toward Russia.

The problem is how strong the boomerang effect is.

The IMF = International Monetary Fund and the World Bank have warned that inflation will hit poor families the most, causing hunger and social unrest in Africa and elsewhere.

Weak growth, rising inflation

"Economic growth is slowing"

On March 22, IMF Managing Director Georgiewa pointed out that the military invasion has spurred inflation and depressed global economic growth.

Inflation, which is accelerating around the world, can weaken personal consumption, and trade stagnation due to severe economic sanctions will also hinder economic growth.

The IMF is expected to significantly lower its global growth rate, which was expected to be + 4.4% as of January.

The OECD also described the outlook for the global economy as "weaker growth, stronger inflation" in a recent report analyzing the economic impact of a military invasion.

The military invasion has a harsh outlook that it will push up prices by more than one point while pushing down the global growth rate of the year by more than one point.

So far, there is no prediction that the growth rate of the entire world will turn negative.

However, caution gradually increased, as former US Treasury Secretary Summers pointed out in a contribution to the Washington Post in March about the possibility of "stagflation" where inflation does not stop even though the economy is stagnant. It has spread.

Europe is particularly concerned.

The OECD expects a military invasion to reduce US growth by 0.9 points, while the eurozone, which has strong ties to Russia, is expected to be reduced by 1.4 points.

In fact, Germany, which has the largest economy in the euro area, announced on March 15 that the "economic expectation index" for the next six months is minus 39.3, the largest since the survey started in 1991. The rate of decline was recorded.

Not only is Germany highly dependent on Russia for energy, but many companies are doing business in Russia.

Volkswagen has stopped local production at its two plants in Russia and has also stopped exporting.

The movement of Europe's largest automobile manufacturer is likely to affect the domestic parts industry.

In addition, the UK budget authorities revised their domestic economic and price forecasts significantly on March 23.

Numbers are shown that symbolize the future economic slowdown and inflation acceleration.

Central bank difficult road

Amid growing concerns about the simultaneous slowdown of the economy and the acceleration of inflation, the central bank, the “keeper of prices,” is faced with an extremely difficult response.

Before the military invasion, the world economy was recovering from the corona disaster, but inflation became remarkable due to the turmoil in the supply network, and the central banks of each country changed their policy to a "rate hike" to tighten monetary policy. There were a series of moves to take off.

But now, with new concerns about slowing growth due to the military invasion, we need to be more nervous about keeping inflation under control while keeping the economy cool. ing.

Tightening monetary policy is a "sword with a sword" that can overwhelm the economy if it is missteered.

A sharp drop in the economy due to the corona disaster.

Record price increases that occurred during the recovery process from there.

And the military invasion by Russia.

A series of "unexpected" situations continue to ask central banks in each country how they can anticipate the future and how to flexibly implement policies.

Washington Bureau Reporter

Yosuke Yoshitake

Joined NHK Nagoya Broadcasting Station in 2004.

After working at the Ministry of Economic Affairs, he is currently affiliated.