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  • Writer's pictureIshfaaq Peerally

Ukraine War and the Economy

How will the war in Ukraine affect the economy? Are higher oil prices $OIL going to lead to a recession? Is a war going to increase investments and production?

There is no doubt that the Russian economy will be adversely affected by this war with a;; these sanctions. Even if Russia wins the war, ruling Ukraine will not be easy and will be very expensive for them. One solution for Russia will be to get closer to China.

China for the time being is very silent on all this. While Russia is aiming to isolate itself from the world, this is not what China aims for. China wants to be a superpower. The Chinese economy itself might not be so affected by this war.

Europe will be the most affected since they are close to the war, they are dependent on Russian oil and gas, and there is now an influx of refugees. I believe we may see a recession in Europe. However, there is also going to be increased spending in defense in Europe.

As far as the American Economy is concerned, I believe that we will see higher inflation but are unlikely to go into a recession again. Stagflation is more likely. America can actually win from this war with increased defense spending, more investments in Europe. America can become the world's largest oil and gas producer. Will the Dollar lose its status as Reserve Currency? If Russia and China get closer and use the Chinese Yuan as a reserve currency, I don't think it will be enough to overtake the Dollar for now. The world has not been divided like during the Cold War. Russia has isolated itself this time.

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