Joao Vale e Azevedo discusses the economic impact of the war in Ukraine

The economic impact of the pandemic on the globalized world cannot be understated. Indeed, it’s hard to discuss growth, prospects and results in any industry today without running into the dreaded issue of an uncertain post-Covid scenario.

Instead of bringing stability, the year of 2022 began with even more concern for the future of the globalized economy. With Russia’s invasion of Ukraine in January, the International Monetary Fund (IMF) already expects the conflict to "severely set back" the world’s economy, which is expected to grow by 3.6% in 2022 and 2023, a major decrease from the 6.1% figure of 2021.

“The war in Ukraine, regardless of the outcome and hoping for its rapid resolution, will have a very negative impact on the world economic situation. Russia will suffer the most from this, and not only for the sanctions it has already been hit by. If Russia will keep going down this path, if it persists in carrying on the war, I believe it is doomed to bankruptcy, which in turn will produce a domino effect in the rest of the West,” said Joao Vale e Azevedo, Chairman of KUNST Global, one of the largest equity firms in the world.

According to Azevedo, the war in Ukraine means greater market instability, rising energy prices that are already out of control, and a further increase in inflation, which could reach double the current levels. The greatest damage will be paid for by Europe, which will also find itself having to manage an unprecedented wave of refugees.

“On a general level, the war throws fuel on the fire of a global economic situation that was, in itself, potentially inflammatory, due to various factors. The first of these is inflation, which is running both in the US and in many European states, and which, in my opinion, is even underestimated,” he added.

The second problem outlined by the expert concerns the so-called commodity crisis. “We read everywhere that this is a transitory situation, determined by the pandemic, but I am convinced that there is more to it. There is a much higher demand for products than in the past, due to the exponential growth of e-commerce, certainly accelerated by the pandemic, but which would have occurred anyway,” Azevedo commented, adding that the main issue is the inability of the distribution industry to meet this increased demand for goods.

The third, and perhaps most important problem, is that relating to the price of energy. “This is really a worrying question, and not only for our distant future, as it has been up to now, but also for our present. We are witnessing it on a daily basis: electricity and gas bills have skyrocketed, families and companies – already suffering from the pandemic – don’t know how to cope with the increases. European governments promise immediate solutions, but these are just band aids with which they hope to heal a much deeper wound,” the expert explained.

Nevertheless, it’s crucial to remember that every crisis has an end, even if that end is not yet in sight. “Due to the past two years, people are more aware that they are part of a community. The fact that we have had fewer opportunities for interaction has meant that we are now more aware of the value of those interactions, and probably also of human life. We are a stronger community. The challenges that await us are very difficult, but together we are much better prepared to face them,” concludes the Chairman of KUNST Global.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes