Russia is the world’s second largest exporter of crude oil and is not a member of the Organization of the Petroleum Exporting Countries (OPEC). Therefore, the dynamics of world crude oil prices is also largely determined by the Russian government’s policy on the country’s crude production. Moreover, the country of 140 million people is also the third largest coal exporter in the world, the seventh largest LNG exporter, and the largest wheat exporter in the world. Due to Russia’s strategic role in the global economy, the war in Ukraine has dealt a serious blow to the global economic recovery.
While not as big as Russia, Ukraine is also a country with a strategic role in the global economy. Some of the world’s strategic commodities are produced in this country of 45 million people. Ukraine is the world’s largest exporter of seed oil, the fourth largest exporter of corn, and the fifth largest exported of wheat. As a result of the war, global commodity prices have gone through the roof, and upended the economic recovery strategies from the Covid-19 pandemic in many countries. The protracted war has put the global economic recovery at the edge of uncertainty.
Challenges facing global economic recovery
Spurring economic growth may not be a focus for all G20 members, considering that there are developed countries that already have high per capita incomes (above US$12,000) and are more concerned about price stability or inflation. However, for G20 emerging economies such as Indonesia, high economic growth is a prerequisite to reduce unemployment and poverty and promote the general welfare of its people.
Thus, a mutual economic recovery strategy is urgently needed, both by focusing on spurring economic growth and controlling inflation after the pandemic. Consolidation among member countries will be able to mitigate factors that could hinder the economic recovery going forward. In general, there are at least three challenges G20 is facing to sustain the economic recovery momentum.
Firstly, it has to urgently find conflict resolution for Russia-Ukraine war. This is of course is a pivotal factor in today’s global economic situations. Peace between Russia and Ukraine will ensure the sustainability of global economic recovery going forward by providing certainty.
The threat of global inflation faced by almost all countries in the world today was initially caused by fundamental factors where the demand side outpaced the supply side. This pushed up inflation which actually had started before the war. The war has only exacerbated it by driving commodity prices — energy and non-energy — to considerably high levels, beyond the demand-supply gap. If peace can be brokered between Russia and Ukraine, the uncertainty factor that drives up prices of many basic commodities can be reduced so that the global economic recovery can be sustained.