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www.amazoniainvestiga.info ISSN 2322- 6307
DOI: https://doi.org/10.34069/AI/2022.56.08.0
How to Cite:
Panchenko, O.I., Arbeláez-Campillo, D.F., Kaminska, O.L., & Rojas-Bahamón, M.J. (2022). Editorial. Amazonia Investiga, 11(56),
6-8. https://doi.org/10.34069/AI/2022.56.08.0
Editorial
War in Ukraine and recession: Is new economic crisis threatening the world?
Guerra en Ucrania y recesión: ¿La nueva crisis económica amenaza al mundo?
Received: September 15, 2022 Accepted: October 12, 2022
Written by:
Olha Ivanivna Panchenko
https://orcid.org/0000-0003-4365-0495
Ph.D in Law, Senior Researcher, Senior Research Fellow of the Department of Doctorate and Post-graduate Studies of
the National Academy of Internal Affairs, Ukraine (Kyiv, Ukraine)
Diego Felipe Arbeláez-Campillo
https://orcid.org/0000-0002-9041-9563
Grupo de Investigación Lenguajes, Representaciones y Educación, Universidad de la Amazonia, Grupo de Investigación
Primmate, Colombia.
Oleksandra Leonidivna Kaminska
https://orcid.org/0000-0002-1524-0176
PhD in Law, investigator of the Investigative Department of Myrhorod District Police Department of the Main
Department of the National Police in the Poltava region (Myrhorod, Ukraine)
Magda Julissa Rojas-Bahamón
https://orcid.org/0000-0003-4882-1476
PhD. Educación y Cultura Ambiental. Docente titular Jorge Eliécer Gaitán. Grupo de Investigación Primmate. Par
evaluadora Colciencias, Colombia.
The struggle between good and evil, light and dark,
democracy and fascism, freedom of speech and
dependence – all this in one way or another
characterizes the confrontation that the Western
world is observing – the Russian Federation’s war
against Ukraine. But does the world community
think about the consequences of this war, which
are just beginning to gain momentum?
The President of the World Bank made a statement
regarding the likely growth of the recession in
Europe as a result of the war in Ukraine. He noted
that “it will take years to diversify world production
after the Russian invasion of Ukraine” (Shalal,
2022). This suggests that the war in Ukraine has a
direct impact on the state of the world economy and
the development of the global economic crisis.
The consequences will be seen in the increase in
food and electricity prices, which will lead to
inflation, a decrease in the value of income and a
burden on demand. The economic policy of
neighboring countries will face disruptions in trade,
logistics, money transfers, and a surge in refugees.
Lower investor confidence will affect the value of
assets, and, as a consequence, the decline in capital
in markets (Kammer, Azour, Selassie, Goldfajn &
Rhee, 2022).
That is, in addition to the human suffering and
humanitarian crisis occurring as a result of the war
on the territory of Ukraine, the world will also
experience a global economic downturn.
Recession is a state of the economy, which is
characterized by a decline in production, a decrease
in consumption costs, an increase in
unemployment, bankruptcy of enterprises, etc.’ that
is, it is an economic crisis. It is part of the economic
cycle – economy grows, peaks, falls and grows
again. Thus, it is impossible to avoid recession. But
there is another side of the coin – when you emerge
from a recession, you need to drive the economy,
which is done by central banks. The consequences
of such “schemes” are: high inflation, markets are
oversaturated with "easy, cheap money", but
production is recovering. If such recovery
(economy recharging) did not take place, then
inflation becomes uncontrollable. And this causes
new recession.
Sadly, the world had not yet recovered from the
consequences caused by the Covid-19 pandemic,
when Russia launched a full-scale invasion of the
territory of Ukraine. That is, impact of the pandemic
and the record inflation that arose as a result of the
war in Ukraine lead to a new global economic crisis.
But is it possible to avoid this inevitable economic
disaster?
Panchenko, O.I., Arbeláez-Campillo, D.F., Kaminska, O.L., Rojas-Bahamón, M.J. / Volume 11 - Issue 56: 6-8 / August, 2022
Volume 11 - Issue 56
/ August 2022
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In early 2022, world GDP was projected to grow by
3.9%. Currently, this forecast is negative – 2.8%
(The Economist, 2022). According to the experts,
this is caused by stagflation – a situation where
economic recession is combined with inflation.
Frederick Neumann and Trevon Logan (2022) in
their interview to Bloomberg noted that the cause of
stagflation is the outbreak of war in Ukraine. The
risk of stagflation is significant and destabilizing for
low- and middle-income economies. Therefore, it
will be difficult for many countries of the world to
avoid recession.
Russia's invasion led to a sharp rise in food and
energy prices, which creates a greater risk of global
stagflation. That is, high prices have a stagflation
effect – depress production and costs and raise
inflation in around the world (Hussein, 2022).
The African Development Bank reports that
African countries are also at risk of stagflation – a
long period of slow economic growth accompanied
by high inflation, as pricing policy and logistics
failures resulting from war, suppress production
(Dzawu, 2022).
According to data by the Organization for
Economic Cooperation and Development, the
world's leading economic systems are on the verge
of recession, as the global energy and food crises
and inflation caused by hostilities are growing
faster than predicted (The Guardian, 2022). For
example, dependence on gas for heavy industry will
entail the entry of the world’s leading economies
into a long period of recession.
Thus, a representative of the Bank of England stated
that Great Britain has faced the longest recession
ever, and the economic decline will continue until
2024. GDP will fall by 0.75% as a result of the
decline in real incomes due to the sharp rise in
energy and market prices as a result of a reduction
in real incomes due to a sharp increase in the prices
of energy carriers and market goods (Gilchrist,
2022).
Government of Prime Minister Rishi plans to raise
taxes and cut spending to help the Bank to take
inflation under control and restore confidence
among British investors. According to estate agents,
the UK market is included in the sustained price
slowdown, which is a negative phenomenon in the
real estate market over the past 12 months (Tajitsu,
2022).
The British currency fell almost 3% against the
dollar, which is the largest drop among major world
currencies. Combined with a large current account
deficit in World Bank, this could mean that
investors consider further depreciation of the pound
as inevitable consequence, which will happen very
soon.
The chief business economist at S&P Global
Market Intelligence is convinced that the speed of
the economic downturn is accelerating after
political and financial turmoil. Therefore, the
economy will fall in the fourth quarter after likely
contraction in the third one, that is, the World Bank
is in recession (Romei, 2022). Thus, we are
observing negative changes in the economic system
of Great Britain, which arose as a result of the war
in Ukraine.
We suggest also paying attention to digital assets.
For example, despite the relevance and
independence of the crypto currency, all digital
coins fell – Bitcoin fell by 14 thousand dollars in
one week by $14,000 in one week. The Terra coin
has dropped by more than 1,000 times, as a result of
a withdrawal from the Anchor platform more than
2.2 billion digital dollars. The reasons for the fall of
the crypto market are obvious - the war in Ukraine
and the global inflation (Spivak, 2022).
As for Germany, the Minister of Economy, Robert
Habeck (2022), said that the country is experiencing
a serious energy crisis, which is slowly turning into
an economic and social one.
According to the Bundesbank, Germany’s economy
is in danger of shrinking by almost 2% this year war
in Ukraine continues and an embargo on Russian
coal, oil and gas leads to restrictions on electricity
suppliers and industry. The country’s research
institutes say that the ban on energy will cost the
European economy about 220 billion Euros, which
is equivalent to 6.5% of annual production over the
next two years. According to the calculations of the
Bundesbank, losses for this year already amount to
165 billion Euros. And the biggest damage will be
caused by higher prices for goods (Randow, 2022).
But it is necessary to understand that these forecasts
do not include individual problems in the financial
markets, that is, the consequences may be much
greater and tangible than now, if the war in Ukraine
continues.
Thus, we can observe the deterioration of the
prospects of the world economy of the leading
countries over the last decades. According to the
IMF, inflation will peak at the end of this year at an
annual rate of 8.8%, will remain high longer than
expected and will slow to 6.5% in 2023 and 4.1%
in 2024 (Martin, 2022).
Clearly, the consequences of the war in Ukraine
also have a negative impact on the economies of
Latin America and the Caribbean. According to a
report provided by ECLAC (2022), the region is
facing an economic downturn, rising inflation, and
a slow recovery of the labor force. This leads to the
increase in the level of poverty or extreme poverty.
The recession is associated with the accumulation
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of the implications of previous crises: the
international financial crisis, the economic tension
between the United States and China, the Covid-19
pandemic, and the war in Ukraine.
Currently, there is a sharp increase in food prices.
The level of extreme poverty grew to 14.9%,
regional poverty – 33.7%. Inflation rose to 8.1%.
The growth of commodity prices, transport costs,
and disruptions in logistics have a negative impact
on the export of goods in the region. The rise in
prices for products, the region buys and sells, has
increased by 23% compared to ECLAC forecasts to
10% (ECLAC, 2022).
Since China is a critical trading partner for Latin
America and the Caribbean, trade disruptions
between China and Russia will be felt in the form
of changes in supply chains, shortages of consumer
goods, and rising prices. Monetary policy interest
rates will also grow in all countries of the region as
a result of the fight against inflation.
Thus, the war in Ukraine is a vivid example of the
fact that the world is on the brink of a global
economic crisis that cannot be avoided. Increasing
imbalances in the world economy, stagflation risks,
and vagueness are the elements of the crisis –
financial, food, social and economic ones, caused
by the war in Ukraine. And while the world
community says sympathetically that Ukraine
needs support and aid, their economic systems will
slow down. Thus, the world will pay a rather high
price for Russia's war against Ukraine.
Bibliographic references
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at Risk of Stagflation, Debt Distress.
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Caribbean (ECLAC) (2022). Repercussions in
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