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THE Russia, Ukraine crisis fuelled high inflation and slow growth in consumer spending worldwide. It has triggered tur- moil in the world financial mar- kets. No country will be spared by imported inflation and global trade disruptions. Commodity prices were already surging be- fore the Russian invasion due to a multitude of factors, namely the coronavirus pandemic, sup- ply-chain disruptions and a re- covering global demand. Commodity prices It is estimated that Russia and Ukraine account for nearly thirty percent of global wheat exports. The war is expected to severely impact grain pro- duction leading to huge spikes in global wheat prices. Nearly 40% percent of the EU's elec- tricity comes from power sta- tions that work on fossil fuels – Russia is the biggest source of that kind of energy. Europe has clearly allowed itself to be- come heavily dependent on the importation of Russian natural gas. With Russia being one of the main suppliers of metal, everyday goods may also rise as a result of it – pushing the price of car components, and every- day goods – such as metal and aluminium cans upwards. Large food manufacturers, such as Nestle, have signifi- cant operations in Ukraine that have been severely disrupted by the war. Ukraine's econo- my is expected to shrink by a whopping 45% this year. Few- er food supplies caused by the war may push the cost of food and energy up which might lead to increase in interest rates worldwide. As the bor- rowing of money gets heftier, consumers will have less mon- ey to spend, whilst mortgage repayment may rise. US - China As the war drags on, fissures are expected in the Western alliance. A case in point is the way the US banned Russian energy imports, whilst the EU, heavily dependent on Russian energy, did not. The relation- ship between the US and Chi- na is also expected to worsen, with Russia becoming increas- ingly dependent on China in matters related primarily to fi- nance and technology. Oil prices up According to Economist In- telligence Unit (EIU) estimates, oil prices are expected to re- main above US$100 a barrel, gas prices are set to rise by at least 50% this year, prices of agriculture commodities will soar and global inflation will jump above 6% this year. The war is, and shall increas- ingly, continue to disrupt land- based trade routes between Asia and Europe and so will air ties between Russia and Europe thus severely disrupting supply chains worldwide. The local scenario Malta's fortunes are no dif- ferent to those of other coun- tries. Recently, Finance Minis- ter Clyde Caruana stated that the war in Ukraine has already cost Malta €200 million in pro- jected price increases. Figures released by the National Statis- tics Office show an increase in food prices in March, pushing the annual inflation rate up to 4.5%, an increase from the 4.2% registered in February, accord- ing to the Harmonised Index of Consumer Prices. Freight costs are a headache. Government's pledge, to extend the rent sub- sidy scheme to support com- panies that have invested in warehousing facilities to order in bulk, in an attempt to spread freight costs, would be a step in the right direction once imple- mented. On a positive note Relative to the EU average, in- flation in Malta has increased moderately in 2021. Govern- ment has rightly committed itself to limit energy prices growth in 2022, although no government can cushion all inflationary effects. It is en- couraging that according to the European Commission winter forecast, Malta's GDP is set to grow by 6% in 2022, reaching pre-pandemic levels of economic activity by mid- year. The relaxation of restric- tion measures is resulting in a better consumer and business sentiment, whilst notable im- provements are being regis- tered in tourism. With a vaccination rate above 90%, Malta has managed to keep the virus at bay. Despite the pandemic, Malta's econ- omy and labour market re- mained vibrant. An economic war These are trying times for the world economy. We are wit- nessing an economic war with a huge impact worldwide. Un- fortunately, Russia's invasion of Ukraine will have lasting negative effects on the world economy. Russia shall probably be a pariah in the internation- al community for a long time, even if an agreement between Russia and Ukraine is reached, whilst fear of another conflict shall keep the world economy on tenterhooks. And the big- gest concern of all is the human loss of lives, with thousands of innocent civilians killed and millions displaced. maltatoday | SUNDAY • 1 MAY 2022 OPINION 13 Frank Psaila is a lawyer specialising in international relations A Putin shock to the world economy Frank Psaila Government has rightly committed itself to limit energy prices growth in 2022, although no government can cushion all inflationary effects