Experts expect Asia to weather impact of Russia-Ukraine war despite immediate risks
Economists and analysts have warned that Russia’s invasion of Ukraine would impact Asia’s energy and commodity prices and affect growth more than previously expected, but they still believe the region could handle the crisis in the long term.
Speaking at a webinar hosted by the Asia News Network on "Impacts of food and energy crises on Asia" following Russia's invasion of Ukraine, Albert Park, chief economist of Asian Development Bank (ADB), said the conflict brought with it several risk factors that have shaken investor and consumer confidence, resulting in less spending. Therefore, the increase in oil and gas price might cause severe impacts, he warned
Park said the overall Asian economy was currently experiencing financial market volatility caused by the aggressive sanctions on Russia by the US and western partners, followed by capital outflows and currency depreciation that have led to a rise in financial stability risks in the region.
Meanwhile, there are also risks from the latest outbreak of Omicron in Shanghai and Guangzhou, in China, and the two major cities are under strict lockdown.
If the Russia-Ukraine war continues longer, it could affect the planting seasons in Ukraine, which would definitely lead to a shortage of staple grains such as wheat, maize, corn as well as rapeseed oil.
Park, however, believes that most Asian nations would face only a moderate impact on food price, as those grains are not a staple for the region. However, a prolonged war could put price pressure on rice, a major staple food of this region, as some countries have started to substitute rice for other grains.
Raimondo Serra, the European Union's directorate-general for agriculture and rural development for Asia and Australia, added that the Russian war had not only led to a spike in food prices but it had also hiked the cost of farming, as Russia is one of the world's major exporters of fertilisers.
In his opinion, although most Asian countries are far from the battlefield in Ukraine, they are still the indirect victims of the Russian invasion because the war has led to a sharp increase in the price of natural gas, a key ingredient in fertilisers.
Serra said higher fertiliser prices were making the world's food supply more expensive and less abundant. This situation comes at a time when the UN Food and Agriculture Organization reported recently that the world food-price index in March had reached the highest level since records were kept in 1990.
However, overall Asia could manage to stabilise growth, he said.
ADB estimates that Asia is going to see an average 5.2 per cent GDP growth this year and 5.3 per cent growth next year, on continued recovery in domestic demand and solid exports, while inflation will rise to 3.7 per cent in 2022 and 3.1 per cent in 2023.
In the meantime, the pace of recovery remained uneven across economies. South Asian countries will see on average 7 per cent growth this year and 7.4 per cent next year, outperforming East Asian and Southeast Asian countries.
Despite various risks and challenges, experts recommended that governments in Asia continue to maintain their support for economic recovery, sustain their development goal, and keep investing in green transformation as well as reforming their tax and financial system.