Two years later, the effects of the Russia-Ukraine war continue

 Russia's economy was feared to collapse under Western sanctions, but it did not; Rather, Russia's economy is in better shape than the Western world.

The sanctions imposed by the West on Russia after the start of the Russia-Ukraine war initially led many to believe that the country's economy would collapse. In reality it did not. Compared to many Western countries, Russia's economy is in rather good shape; In other countries, however, its influence is lasting.

But almost all the countries of the world have been affected more or less due to this war. Immediately after the start of the war, oil prices exceeded $100 per barrel. Energy importing countries fall into a crisis. Along with that, the exchange rate of the US dollar increases. Under these two pressures, many countries become disoriented. Inflation rates hit record highs in both developed and developing countries. Bangladesh was forced to restrict imports under both these pressures, which is still ongoing. The life of ordinary people becomes difficult.

If European countries increase military spending, the purchasing power of their people will decrease. Europe is one of the largest export destinations of Bangladesh.

Salim Raihan, Professor, Department of Economics, University of Dhaka  

After the outbreak of the war, the disruption of food transport through the Black Sea caused food inflation. The index rose to a record 159.7 points in March 2022 after the start of Russia's attack on Ukraine; In the following four months its value remained above 150. The reality is that food prices in the world were the highest in 2022 since the introduction of the FAO index in 1990.

 Meanwhile, Russia has better growth than the US and Europe in 2023 despite the war and thousands of sanctions. The country's economic growth last year was 3.6 percent, although Russia's economy shrank by 1.2 percent in 2022. On the other hand, the growth of the United States in 2023 has been 2.5 percent. However, the size of the economy of these two countries is not the same. It is assumed that Russia will have a good economic growth in the current year 2024 as well. The International Monetary Fund (IMF) predicts that Russia's growth this year will be 2.6 percent. Although the country's government forecasts, growth will be 2.3 percent.

The world's two largest economies, Japan and the United Kingdom, are officially in recession again after 2020. Both these countries have contracted GDP for two consecutive quarters. Now the question has arisen, whether there will be a recession in the United States, the world's largest economy.

The reality is that while the effects of the 2020 pandemic may have been overcome as quickly as possible, the effects of this war are lasting. Due to various restrictions on Russia's energy due to the war, all countries, including developed countries, had to buy fuel at a much higher price. As the rate of inflation started to increase, the rate of growth slowed down due to the aggressive increase in the policy interest rates in the country. The World Bank predicts that global growth in 2024 will be the slowest since the pandemic. That is, the world economy is still not able to come out of the shadow of war.

In this regard, Professor Salim Raihan of the Department of Economics of Dhaka University said that the way the geopolitical equation is changing, it does not seem that the tension will subside soon, rather it is feared that it will increase. If European countries increase military spending, the purchasing power of their people will decrease. Europe is one of the largest export destinations of Bangladesh. In addition, there is the attack of the Houthis in the Panama Canal. The ship fare is increasing. All together, the cost of raw material collection can increase. That is, there is a risk of further increase in the inflation rate.   

Meanwhile, the interest of other countries in BRICS, led by Brazil, Russia, India, China and South Africa, is increasing. Last year, about 40 countries expressed interest in joining the alliance. Ultimately 22 countries formally applied. Finally six countries were decided to join the BRICS. BRICS is growing in popularity in contrast to the overall Western-led globalization process, led by Russia and China.

Dedollarization has accelerated across the world in the past two years. Not only Russia or anti-Western countries, many countries known to be close to the US have started to keep foreign exchange reserves in other currencies instead of dollars. Trade in other currencies is also increasing. By the end of the third quarter (July-October) of 2023, the dollar's share of global reserve currency fell to 59.2 percent, from 70 percent in 2000.

Meanwhile, international trade in Chinese currency Yuan and Russian currency Ruble is increasing. China has almost agreed to buy oil from Saudi Arabia in its own currency, the yuan. In fact, the US sanctions on Russia and the way the US central bank Federal Reserve aggressively raises policy interest rates to prevent global inflation, the dollar exchange rate increases. This led to severe dollar crisis in many countries including Bangladesh. Many countries were forced to start trading in other currencies instead of the dollar. BRICS also wants to trade in a single currency or the currency of its member countries instead of the dollar.

Where is the economy after two years?

After February 24, 2022, today marks two years of Russia-Ukraine war. During this time oil prices fell and returned to pre-war levels. The reality is that oil prices have fallen due to lower demand due to rising prices and higher policy interest rates, particularly due to the economic crisis in China. However, due to the high exchange rate of the dollar, many countries, including Bangladesh, are not getting much of its benefits. Inflation rates in countries like the US rose to 9 percent in 2022, but have now fallen to around 3 percent, although Bangladesh has long experienced high inflation. But overall the global economy is not able to overcome the recession.