Burning through lives, resources, and funds
Paying the price of war. (Photo: Institute for Policy Studies)
The past few months since Russia invaded Ukraine had everyone in the world scrambling to pay inflated bills.
We’ve been so busy counting our dwindling pennies, we forget that the two countries in conflict themselves are also losing money. A whole lot of it.
The numerous sanctions imposed on Russia are bad enough already (personally, I would’ve completely lost it if my country didn’t have McDonald’s anymore), economic activity in both Russia and Ukraine are almost impossible with the current situation.
External sanctions on Russia have caused the country to release its reserve fund used for emergency spending by $3.52 billion to ensure economic stability. Despite being in the “most difficult” position the country has been in over three decades, the Russian government is still confident in their ability to withstand. They’re not making it easier for foreign companies to pull out as they introduced capital controls which prevent investors from selling assets should they choose to leave the country.
The World Bank recently posted “War in the Region” — an economic update that forecasts countries in the Eastern Europe region’s GDP to contract by 30.7% in 2022 due to trade disruptions and other war-related complications.
Ukraine’s GDP is projected to take the biggest hit with a 45.1% contraction due to nearly half of the businesses being closed alongside Black Sea shipping, which amounts to 90% of the grain exports and half of its total exports. Despite a sizable loan granted by the World Bank to Ukraine, it barely dents the infrastructure damage exceeding $100 billion — about two-thirds of Ukraine's 2019 GDP..
There’s no better way to say it. This war’s economic implications suck and it will continue to do so unless real drastic changes happen soon.
Local optimism unscathed
While everything is up in flames out there, higher ups seem to think everything is fine here.
The Bangko Sentral ng Pilipinas said last Monday that the implications of the Russia - Ukraine war on the Philippine economy and banking systems are “limited” due to our distance from the conflict area.
While I’d love if this was true, BSP Governor Benjamin Diokno said earlier this year that inflation will continue to rise for consumer goods should the global conflict persist. We’ve already seen how high gas prices can be and the ripple effects it has on distribution. And with peace talks between Russia and Ukraine having minimal progress, I don’t think it’s safe to assume that the Philippines is out of the woods just yet.
Regardless, it looks like the higher price tags aren’t stopping local consumers from making purchases. It’s been a long pandemic (and yet, we’re still living in one) but Filipinos have just about had enough as data from the Q1 2022 Consumer Pulse Study by insights company TransUnion revealed a few interesting shifts in consumer behavior.
36% of Filipino households saw a recent increase in their income while 75% are expected to follow in the next 12 months.
Additionally, over half of the respondents who are applying for a credit card soon belong to the Gen Z crowd. As the economy opens up with establishments allowing 100% operations, more non-essential spending will come into play.
