Prospects for the global economy have darkened since the outbreak of conflict in Ukraine, the World Trade Organization (WTO) said in a new report published on Tuesday. It has forecast that record-breaking prices for natural gas would hurt Europe the most.
According to the report, the most immediate economic impact of the crisis has been a sharp rise in commodity prices. “Despite their small shares in world trade and output, Russia and Ukraine are key suppliers of essential goods including food, energy, and fertilizers, supplies of which are now threatened by the war,” it said.
The WTO pointed out that, unlike oil prices, natural gas prices tend to diverge strongly across regions. The price of natural gas in Europe soared 45% between January and March to $41 per million Btu (British thermal units), whereas prices remained relatively low in the United States at around $4.9 per million Btu.
“Higher oil prices may reduce real incomes and import demand worldwide, while higher natural gas prices would probably have a greater impact in Europe,” WTO economists said.
The report also noted that Western sanctions on Russian businesses and individuals are likely to have a “strong effect” on commercial services trade. Russia is a net services importer, with imports in 2021 valued at $74 billion and exports totaling $55 billion.
In 2019, the European Union accounted for more than 42% of Russia’s services imports and 31.1% of its services exports, said the WTO.
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