What’s Going On Here?Russia’s made its bed: a major financial institution said on Thursday that the country’s economy will shrink 10% this year. What Does This Mean?Russia’s decision to invade Ukraine has had serious ramifications for its economy, with one-time frenemies now going all in on crippling sanctions. They've been continuing to reduce their purchases of the country’s oil and natural gas, and foreign investors with money to burn have been boycotting the country altogether. The Economic Bank for Reconstruction and Development (EBRD) thinks it’s having the desired effect: it’s expecting the Russian economy to shrink by 10% this year. And even if the country does agree to a ceasefire sometime soon, it might not help: the EBRD thinks sanctions will stick around to limit the country’s economic growth for the next few years. Why Should I Care?Zooming in: It’s everybody’s problem.
Of course, Russia’s invasion is already having far-reaching consequences around the world. And according to the World Bank, it’s the poorest countries that are set to take the brunt of the damage. In fact, the organization reckons soaring prices of products like wheat could push millions into poverty, and some developing countries to a point where they can’t afford to pay their debts. EBRD agrees, and warned that North African economies and Lebanon – which buy a lot of wheat from Russia and Ukraine – are among the most exposed.
The bigger picture: Thanks for nothing, OPEC.
Sky-high oil prices are also poised to stunt economic growth around the world, and yet OPEC – a group of oil-producing nations – said on Thursday that it wouldn’t be increasing its supply any more than already promised. It’s a good job, then, that the US is releasing 180 million barrels of oil – the largest draw from its reserves in its 45 year history – over six months starting in May. That’s not a long-term fix, but analysts think it could bring down prices in the short term. | 