Washington, 26 February 2022 (TDI): Amidst rising sanctions imposed on Russia after the country invaded Ukraine on Thursday the world braces for a steep rise in inflation with the Asian economy seeing the most harrowing effects.
The stock market also took a major hit. The invasion is likely to cause volatility in the stock market going forward. The United States President, Joe Biden called for stringent sanctions against Russia.
These include stopping the export of technology from the US, cutting off Russia’s largest banks from financial institutions in the west, and freezing Russian assets worth trillions of dollars.
As a result, oil prices shot up significantly, at one point reaching $105 a barrel. The effects of rising oil prices will disrupt many economies around the world. Most Asian countries are oil importers.
India and Indonesia
India, the world’s third-largest oil importer is set to face the biggest shock of this situation average prices are set to go higher as the Indian rupee started to show signs of tumbling against the dollar earlier this week.
Indonesia and Singapore are also markets that will feel the effects of the invasion, even though both countries voiced their support for Ukraine, neither of the two imposed any sanctions as the economic fallout would be quite devastating.
Andreas Harsono, a researcher at Human Rights Watch in Jakarta said that if the situation worsens the rippling effects of this could cause upward pressure on the Indonesian Rupiah, driving up fuel and oil prices.
Consequently, it will cause most basic commodities to disappear from store shelves. Although, exporters do stand to gain more as the prices of commodities rise.
Japan and South Korea
Japan and South Korea are expecting higher inflation in the short run. Japan also announced sanctions against Russia. South Korea agreed to abide by its international allies.
Japan is set to have a considerably small impact from the crisis as the country’s imports from Russia equate to about 2%. Rising fuel prices are expected to cause a 2% increase in inflation going forward.
China
China has chosen to avoid using the word “invasion” for Russia’s advances and has accused the United States of adding fuel to the fire. The authorities are already struggling to keep the prices of commodities in check.
However, the effects on the economy are likely to be minimal, even though China imports most of its energy from Russia it shouldn’t be hard for the country to find an alternative.
Additionally, both countries will likely find a workaround for trade even though the sanctions prevent Russia from trading in dollars, pounds, euros, and yen.
Global Stock Markets
Global stock markets saw major disruptions as the invasion happened. The speculations of war increased the risk of runaway inflation. Many stock markets fell, as a result, S&P fell 5% on Thursday.
Hang Seng in Honk Kong fell by 3.2%. DAX index in Germany fell by 4%. Russia took the worst hit, with stocks in Moscow dropping by 33.3%. After the stocks fell people started buying them up in the hopes of profiting off of them in the long run.
The crisis could slow economic growth which would plunge economies around the world into recession. Central banks are at a crossroads as they need to control inflation but also need to stimulate the economy to avoid a recession.
