Forecast decline in global cereal exports due to the Russian invasion of Ukraine in 2022, by cereal type and forecast model .... Ukraine Exports of iron and steel to Russia .... Imports
TRƯỜNG ĐẠI HỌC NGOẠI THƯƠNG CƠ SỞ II TẠI THÀNH PHỐ HỒ CHÍ MINH o0o MID-TERM PROJECT Subject: Macroeconomics Topic: THE EFFECT OF THE RUSSIA-UKRAINE CONFLICT ON UKRAINE Group : Class : K61CLC1 Specialization : International Business Administration Thành phố Hồ Chí Minh, ngày 18 tháng 10 năm 2022 THE EFFECT OF THE RUSSIA-UKRAINE CONFLICT ON UKRAINE GROUP MEMBERS Cao Minh Anh Ngô Lê Hạo Nhiên Nguyễn Trần Liên Nhi Ngô Khánh Linh Hồ Xuân Nguyên Nguyễn Phan Xuân Hùng Phạm Thị Thu Hà Nguyễn Hoàng Nhật Vy Nguyễn Trọng Đức 10 Nguyễn Thảo Ngân Giang Section Chapter 1: Introduction 1.1 The background of the Russia-Ukraine war Contributor 1.1 The roots of the war 1.2 Timeline Cao Minh Anh, Nguyễn Hoàng Nhật Vy 1.2 The purpose of this article 2.1.1 GDP Nguyễn Trọng Đức 2.1 National yield 2.1.2 GNP 2.2.1 Imports Chapter 2: The economic effect of the war 2.2 International transactions 2.2.2 Exports 2.2.1.1 Mineral fuels, oil, and mineral products Hồ Xuân Nguyên 2.2.1.2 Machinery and equipment Nguyễn Trần Liên Nhi 2.2.2.1 Cereals Nguyễn Thảo Ngân Giang 2.2.2.2 Iron and steel Nguyễn Phan Xuân Hùng 2.3 Inflation Ngô Lê Hạo Nhiên 2.4 Unemployment Ngô Khánh Linh 2.5 The effect on EU Phạm Thị Thu Hà 2.6 Possible strategies to recover Ukrainian economy Ngô Khánh Linh Chapter 3: Conclusion Nguyễn Hoàng Nhật Vy References Nguyễn Trần Liên Nhi List of figures Figure Ukraine – Imports of Goods Figure Ukraine’s Top 10 Imports Figure Ukrainian Importers Spending On Mineral Fuels-related Product in 2021 (billion US dollar) Figure Ukraine Imports: Year to Date: ME: Machines and Equipment Figure Ukraine Exports 10 Figure Ukraine exports of grains to EU (million metric tons) 11 Figure Ukraine’s Projected Share of World Exports 2021/22 11 Figure Forecast decline in global cereal exports due to the Russian invasion of Ukraine in 2022, by cereal type and forecast model 12 Figure Ukraine Exports of iron and steel 13 Figure 10 Ukraine Exports of iron and steel to Russia 14 Figure 11 Ukraine Inflation Rate 15 Figure 12 Ukraine Gasoline Prices 16 Figure 13 Gas exports to the EU by source 17 Figure 14 Import, export and trade balance between EU and Ukraine from 2011 to 2021 18 Figure 15 EU trade in goods with Ukraine and other non-EU countries from 2020 to 2021 18 List of tables Table Ukraine’s Top Exports By Category Document continues below Discover more from: Macroeconomics Trường Đại học Ngoại… 570 documents Go to course Đề thi cuối kì KTVM Macroeconomics 100% (30) Bai kinh t vi mo - 25 tập kinh tế vi mô Macroeconomics 97% (32) Đề Kinh tế vĩ mô - ngày thi 21/11/2021 Macroeconomics 61 100% (9) Macroeconomics Note Lecture notes Macroeconomics 100% (7) Ly thuyet macroeconomics 36 Macroeconomics 100% (7) 900 câu trắc nghiệm vĩ mô1 184 Macroeconomics 100% (6) Chapter 1: Introduction 1.1 The background of the Russia-Ukraine war 1.1.1 The roots of the war Russian President Vladimir Putin declared war on Ukraine and launched airstrikes and plunged Europe into a nightmare not seen since World War II There had been a longsimmering conflict since Russia’s 2014 annexation of Crimea The early 20th century saw a brief period of independence for Ukraine, the second-largest country in Europe by area after Russia, before it became part of The Union of Soviet Socialist Republics in 1922 In 2008, Ukraine decided to join the North Atlantic Treaty Organization (NATO), but this plan was postponed In February 2010, a new Ukrainian President promised that Ukraine would be a “neutral state” and corporate with Russia and Western alliances like the EU and NATO In 2014, Russia annexed Crimea, located along the northern coast of the Black Sea and recognized as being part of Ukraine This led to violence in Donbas and intense fighting and violence along the border regions that separated Russia and Ukraine to the East of Europe.Putin, who blamed the US and EU for prompting an "extremist" overthrow, answered with what was, until his full-out intrusion of Ukraine, the mainland in post bellum Europe: the seizure and extension of Crimea Russia proceeded to move supportive of Moscow nonconformist gatherings in Ukraine that broadcasted two free republics in the eastern Donbas locale along the Russian boundary, sending off a contention with the Ukrainian military that had guaranteed an expected 14,000 lives before the more extensive conflict's emission Since then, Ukraine demanded to join NATO and the EU to reduce its reliance on Russia, which was opposed by Russia and resulted in Russian invasion on Ukraine 1.1.2 Timeline • From February 24 to March 23: Vladimir Putin, the president of Russia, announced plans to overthrow the Ukrainian government through a "special military operation." The West decided to impose financial and trade sanctions on Russia • From March 25 to July 3: While Ukraine launched a counteroffensive in the north and south, Russia refocused on the East Advanced missile systems were sent to Ukraine by the US and UK • From July up to now: Russia expanded its goals again, including Kherson and Zaporizhia Ukraine used missiles to devastate Russian ammunition, bases, and command posts deep behind the front lines 1.2 The purpose of this article The purpose of this article is to demonstrate the numerous effects of the Russian invasion on Ukraine’s economy by comparing certain economic aspects of this nation before and after the war, namely national yield, international transactions, inflation, and employment Besides Ukraine, the following article also elaborates on some general impacts on EU regions and suggests potential solutions to address the problematic issues Chapter 2: The economic effect of the war 2.1 National yield According to ZingNews (2022), the World Bank reported that half of the businessmen in Ukraine were closed, while the remaining companies just tried to weather this period With this scenario, GDP is predicted to reduce by 75% in this year In research from Bennett (2022), the war is the major cause for the economic catastrophe in Ukraine, mainly due to the fact that Ukraine is an agricultural country The war in Ukraine also raises the spectre of worsening food security globally, because Ukraine is a significant food exporter Wheat and sunflower are mostly grown in the south-east of Ukraine, where war damage is the most considerable Corn and soybean production is mostly concentrated in the north-east of the country, which has also experienced largescale destruction, accounting for 28 percent of the country’s corn production and 20 percent of soybean production Aside from direct war damage, agricultural production is hampered by lack of fuel, access to seeds, fertilizer and equipment According to the Food and Agricultural Organization, in this spring, a fifth of agribusinesses have enough fuel to start planting There is a prediction that around a fourth of agricultural land in Ukraine will not be planted this year Ship operations have suffered restriction due to a significant negative damage to the seas and transport infrastructure in the Black Sea add to long-term logistical risks 2.1.1 Gross Domestic Product (GDP) Overall, after a reduction of 15% in season of this year, GDP of Ukraine continues to decline in season At 8/9, Ukraine statistics observed that the economy of this country dramatically fell by 37% in season compared to the same period of last year The CEIC.com’s data (2022) on Ukraine’s GDP states that a negative growth of 15.1% was seen in the GDP in Ukraine, with a subsequent decline to end at 19.1% YoY in Jun 2022 Real GDP growth year-on-year data in Ukraine has been updated quarterly, available from March 2002 to June 2022, at an average rate of 3.3 Gross National Product (GDP) in Ukraine reached 19.1% YoY in June 2022, following negative growth of 15.1% in the previous quarter 2.1.2 Gross National Product (GNP) Overall, Ukraine’s GNP was at about 30,5k USD mn in 2019, with a subsequent fluctuation between 30k USD mn and 50k USD mn until April 21, before increasing dramatically to 64k USD mn so far As reported by CEICdata.com (2018), Gross National Product in Ukraine was recorded at 47.3 USD bn in Dec 2019, after which it experienced a dramatic decrease to approximately 33.7 USD bn in Jul 2020 The same pattern was seen in this figure in season of 2021, from 46.5 USD bn to 35.7 USD bn At the end, the GNP of Ukraine recorded an increase from the previous number of 54.529 USD bn for Sep 2021 and reported at 63.907 USD bn in Dec 2021 Notwithstanding all the growth of Ukraine’s cereal industry, the intrusion of Russia on the country has upended the economy and caused considerable turmoil in the exportation of this sector specifically Prior to Russia's military attack, the average export of grain was up to million tonnes a month, but the figure has plummeted to a trough of million tonnes since then (Reidy, 2022) Still, expert’s predictions are, to a certain extent, unpromising According to estimates as below by Statista, worldwide wheat exports are forecasted to decline between 6.95% and 12.34% due to the Russia-Ukraine war The worst case scenario assumes no wheat exports from Ukraine for the entirety of 2022 on top of major recessions in both countries and a decline of Ukrainian production by 20 percent 0.00% -2.00% -2.79% -4.00% -5.13% -6.00% -8.00% -6.95% -7.32% -10.00% -9.54% -12.00% -12.34% -14.00% Wheat Maize Mild scenario Other cereals No Ukrainian exports Figure Forecast decline in global cereal exports due to the Russian invasion of Ukraine in 2022, by cereal type and forecast model Source: https://www.statista.com/statistics/1282395/expected-decline-in-worldwidecereal-exports-due-to-war-in-ukraine/ 2.2.2.2 Iron and steel As stated by Beaubien (2022), the conflict with Russia has sparked worry throughout the world about how to deliver Ukraine's abundant production of wheat, corn, and sunflower oil – its leading exports – to international markets The nation's metalworks have suffered even greater devastation as a result of the war For instance, bulk iron ore exports from Ukrainian ports have entirely ceased These exports are transported in tons aboard enormous cargo ships 16 While some grain ships have been let to leave Ukraine lately, there is no agreement yet to allow other cargo ships to transit the Black Sea Although the procedure is time-consuming and expensive, some iron ore and steel are transported by rail to ports in Romania and Poland Logistics are made more difficult by the fact that Ukraine's railroads operate on a different gauge of track than Western Europe, necessitating the shifting of goods at the border gate Throughout 2021, Ukraine exported iron and steel worth 13.14 billion USD The exports of iron and steel in Ukraine witnessed a slight decrease overall from 2012 to 2021 To be more specific, the figure went down during the first half of the period, from roughly 15 to 7.5 billion USD in 2016 Then, it increased to 10 billion in 2018 before rolling down to nearly 7.5 billion in 2020 However, the number went up by around 13 billion USD at the end of the timeline Billion 16 14 12 10 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Year Figure Ukraine Exports of iron and steel Source: https://tradingeconomics.com/ukraine/exports/iron-steel Ukraine exports of iron and steel to Russia was 841.66 million USD during 2021 The figure in iron and steel exports to Russia from Ukraine experienced a downward trend, in general Particularly, the number considerably decreased from 2.3 billion USD in 2012 to nearly 0.7 billion in 2016 After that, it fluctuated between 2017 and 2021 However, the year 2020 witnessed the lowest figure throughout the period at roughly 0.5 billion USD 17 Million 2500 2000 1500 1000 500 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Year Figure 10 Ukraine Exports of iron and steel to Russia Source: https://tradingeconomics.com/ukraine/exports/russia/iron-steel 2.3 Inflation Russia’s invasion of Ukraine in 2022 has consequently triggered a rapid increase in the inflation rate of Ukraine on account of various deterrents, which include disrupted supply chains, the scarcity of supply sources, and severely destroyed infrastructure and equipment needed for the production line These problems lead to a dramatic rise in the production payments overall, causing the growing inflation rate in Ukraine Having a thorough observation of the chart below, it is apparent that on the arrival of 2022, the rate above swelled with an astonishing velocity and reached the highest point of 24.6% in September 2022, which was much larger than the figures in 2021 30 23.8 25 21.5 20 24.6 22.2 18 16.4 13.7 15 10.9 10.3 10 10 10.7 10 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Figure 11 Ukraine Inflation Rate Source: https://tradingeconomics.com/ukraine/inflation-cpi 18 To be more specific, it is the food prices that tremendously contribute to the inflation rate throughout recent months in 2022, according to Iacurci (2022) In fact, Ukraine’s markets were already witnessing soaring food bills before enduring contemporary war, mainly due to domestic battles plus weather-related hardships (Emediegwu, 2022) After Russia’s invasion in 2022, sanctions imposed harshly on Russia have triggered a dramatic shortfall in some food supply chains of Ukraine, subscribing to the rising inflation in general of this country Statistically, the Trading Economics (2022c) estimates that the figures for food inflation in Ukraine saw a significant increase over a nearly one-year period commencing from October 2021, with the beginning of 13.6% (October 2021) growing up to 31.7% (September 2022) Consequently, there would be fewer possibilities for the impoverished region to purchase necessary food, instigating more serious poverty in society Moreover, spending residential income on food would prioritize other societal utilities, such as recreational activities or clothing (Weersink & von Massow, 2022) Other changes in energy prices in Ukraine during the conflict are also noticeable Weersink & von Massow (2022) stated that, at first, it is undeniable that Russia has top-led as a major supplier of oil over the globe, and largely taken up a large proportion of the world’s natural gas (23%) Therefore, after the sanctions against Russia, the invasion has bombarded whole overseas energy markets, including Ukraine’s Furthermore, the post-covid damage in this country is still in repair, which adds more alarming issues for Ukraine to recuperate from continually emerging gasoline prices From the chart beneath, there is no doubt that from late 2021 to early 2022, the amount of money paid for gasoline witnessed a stabilization of around 1.13 USD/Liter However, when it comes to the climax of the battle, dramatic growth was seen in the figures in May 2022 and June 2022, reaching the stage of 1.66 USD/Liter and 1.67 USD/Liter, respectively Long-term disruption in pipelines, high living standard crisis and cold weather anticipated next month would be one of the most tragic impacts due to this booming price, as a result (Davies, 2022) 1.8 1.66 1.67 1.6 1.35 1.4 1.2 1.17 1.12 1.08 1.1 1.18 1.13 1.3 1.29 1.15 0.8 0.6 0.4 0.2 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Figure 12 Ukraine Gasoline Prices Source: https://tradingeconomics.com/ukraine/gasoline-prices 19