Russian President Vladimir Putin’s large-scale invasion of Ukraine—the first major war in Europe since the end of the Second World War—is inflicting widespread casualties that’s resulting in a humanitarian catastrophe. The economic fallout of this crisis is having reverberations around the world.
EDC Economics continues to monitor developments—including the duration, intensity, and location of conflict, the terms of any negotiated settlement, as well as ongoing sanctions and trade restrictions taken by both Russia and the West—as we update our forecasts.
Markets have remained relatively composed, a sign of the times, perhaps, numbed by episode-after-episode of “unprecedenteds.” The VIX, the Chicago Board Options Exchange’s famed fear gauge, isn’t much different from where it was early last year and is certainly lower than where it was at this time, two years ago. Haven assets, like gold, have been trading in the same range for much of the last two years. If anything, markets appear more preoccupied with the reaction of central bankers than with the actions of the generals.
The conflict threatens to exacerbate ongoing supply chain disruptions, already a key driver of global inflationary trends. Russia is the world’s largest exporter of grains and fertilizers and supplies about 40% of the world’s palladium, 30% of titanium, is a key nickel producer, the third-largest exporter of coal and steel, and fifth-largest wood exporter. Few industries will escape the pricing pressures caused by shortages of such critical materials—from agriculture and autos to aerospace, cleantech, construction and communication technologies...
This was excertped from a 10 March 2022 commentary by Stuart Bergman Interim Chief Economist and Vice-President, Export Development Canada.