The Russia-Ukraine war is precipitating an economic crisis like never before, says the second brief of the Global Crisis Response Group on Food, Energy and Finance released June 8. The group, steered by the United Nations, has termed it the “largest cost-of-living crisis”.
UN Secretary-General António Guterres and Rebeca Grynspan, Secretary-General of the UN Conference on Trade and Development, released the assessment.
The war hit the world even as the COVID-19 pandemic already crippled many economies. “The largest cost-of-living crisis of the twenty-first century has come when people and countries have a limited capacity to cope,” the assessment read.
An evaluation by the UN Global Crisis Response Group and the UN Regional Economic Commissions shows that 94 countries with a population of 1.6 billion are severely impacted by at least one impact of the war.
“Out of the 1.6 billion, 1.2 billion or three quarters live in ‘perfect-storm’ countries, meaning countries that are severely exposed and vulnerable to all three dimensions of finance, food, and energy, simultaneously,” said the assessment.
The war has set in a vicious cycle: higher inflation leading to higher cost of living and that, in turn, wiping out people’s real income — making them unable to cope with the rising costs.
“In one way or another, everyone is exposed to the shock waves of the war. The level of exposure of a country and its ability to deal with the shock determine a country’s vulnerability,” said the assessment. Earlier, the World Bank in an estimate said that the price rise of wheat and corn only due to the war has reduced average household income by 1.5 per cent since the war started.
To cope with this dip in income level, people are already — particularly in the most vulnerable Africa continent — cutting their food intake, taking out children from schools besides restricting much other essential expenditure.
The World Food Programme estimates that the number of severely food insecure people was already 276 million at the start of 2022 and will increase to 323 million by the end of this year.
This is fastening a large population entering into poverty for the first time. For instance, as quoted in the assessment, “in Africa, 58 million people living just above the poverty line are at risk of sliding into poverty due to the combined effects of the pandemic and the war in Ukraine.”
In the South Asia region that includes India, more than 0.5 billion people are affected by the war’s impacts.