War in Ukraine: Twelve disruptions changing the world

| Article

On March 17, 2022, we wrote about the war’s extraordinary toll on lives and livelihoods. At that time, we set out the 12 short- and mid-term disruptions that had the most potential to reshape industries and economies. Those disruptions are gathering force. In this article, we offer 12 charts to illuminate the potential strength and direction of these shifts and their effects on lives and livelihoods. Some of these charts use the macroeconomic scenarios we laid out in our first article that provide guidance on the range of potential outcomes. We see two critical dimensions: the scale and duration of disruption, and the impact of government policy, consumer, and business responses. See sidebar “More on our scenarios.”

The invasion of Ukraine is causing a massive humanitarian crisis

Ukrainian refugees have considerably increased the population of host countries.

The vulnerable will suffer the most

As people spend more on essentials, especially food, many European households could fall into poverty.

Energy policy is rotating toward secure access and source diversification

Even after increasing supply and reducing demand, a significant portion of Europe’s gas supplies from Russia is at risk.

Food security is on the agenda

The race for critical materials, equipment, and commodities intensifies

As key commodities surge, automotive input costs could increase by about 15 to 25 percent.

A new age of supply chain management has arrived

Global value chains depend on Russia and Ukraine mostly for agricultural and material and chemical products.

Global technology standards are more likely to separate

Most telecom, media, and tech companies from the United States and the European Union are leaving Russia or scaling back, while others are staying.

Financial-system effects are unpredictable

The US yield curve is close to inverting, which historically has been followed by credit losses.

Defense spending is rising

Fifteen NATO countries and Sweden have said they will spend more on defense; five countries will now meet NATO’s spending goal for the first time.

Cyber is a stage for conflict

Cyberattacks have been rising since 2017.

Corporate actors are taking a stand

Most European and US Fortune 500 companies have scaled back operations in or exited Russia.

Volatility, volatility, volatility

Volatility has increased since the war in Ukraine, yet significantly less than during the outbreak of COVID-19, while geopolitics is now seen as the biggest risk to growth.

These disruptions are already affecting people’s lives and livelihoods with potent force and should be part of every company’s scenario planning. And the longer the war lasts, the more powerful and unpredictable these disruptions may become.

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