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Russia Invasion of Ukraine Cost the Global Economy $1.6 Trillion

russia invasion of ukraine cost the global economy $1.6 trillion

A German analysis released staggering findings that have shaken the world. It confirmed what many had predicted and feared: a shocking 1.3 trillion dollars were drained from global finances in 2022 due to the long-standing RussiaUkraine war, resulting in an immense economic burden for all involved.

The Western States Were Particularly Affected

On Tuesday, the German Economic Institute (IW) released a study claiming that Western economies experienced an impressive two-thirds decrease in global production due to the war. IW expert Michael Groemling commented on this alarming situation noting its “high global economic significance.” The effects were especially felt as issues with energy and raw materials supplies put immense pressure on companies worldwide. It is evident that these troubling developments are causing deep reverberations across nations and industries alike.

russia invasion of ukraine cost the global economy $1.6 trillion

Rising Energy Prices After Russia Ukraine War Increased German Inflation

In 2022, inflation in Europe’s biggest economy Germany rocketed to an immense 10 percent due to rising energy costs, which were too challenging for many businesses to calculate. Relief measures soon followed, and the Federal Statistical Office reported that by January of 2023, prices had steadied at 8.7 percent. The IW commented that “high energy prices caused cost shocks on the production level.”

The steady rise of consumer prices slowly diminished the purchasing power that households had, leading to a decrease in their consumption levels. Companies also felt reluctant to invest due to the global climate of uncertainty and increasingly higher costs. The institute declared these occurrences as consequences resulting from this occurrence.

A Similar Cost May Occur in 2023

According to a projection from the IW, 2023 will bring an additional loss of roughly one trillion dollars in global value-added. Unfortunately, Frau Groemling warned that raw material deficits and unpredictable circumstances may persist beyond this year, which could jeopardize economic growth for years to come. On the more optimistic side, though, the International Monetary Fund (IMF) recently revised their expectations upwards by pointing to 2.9 percent global growth instead of 2.7 during 2023!

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