Ukraine war pulls rug out from under world economy rebound

This year was supposed to confirm the world economy's comeback from the Covid pandemic crisis. Instead, the six-month-old war in Ukraine has sparked fears of recession.

Two 'small' economies rattle world

"Six short months ago the macro landscape was markedly different from today," the financial data firm S&P Global said in a recent report.

Both the United States and eurozone economies were expected to see strong growth, and elevated inflation levels were seen by policymakers and markets as transitory.

"Things have changed, and not for the better," added S&P Global.

Global growth forecasts have been repeatedly cut, with the International Monetary Fund now expecting a 3.2 percent expansion compared to nearly five percent earlier.

Russia and Ukraine together account for just two percent of global output and trade, according to the OECD.

But Russia is a major exporter of oil, gas and agricultural goods, while many developing countries rely heavily on grain from Ukraine, one of the breadbaskets of the world.

The war has disrupted those shipments, causing energy and food prices to surge worldwide.

Inflation has soared everywhere, prompting central banks to aggressively hike rates -- a move that usually tames prices but slows economic activity.

Prices soar everywhere

In Tunis, "low-income people are living a nightmare", said Naima Degaoui, a 70-year-old former nurse. 

"Prices on almost everything are rising: peaches, apricots, peppers for which the prices have quadrupled, red meat," she added.

Some 11,000 kilometres (6,800 miles) away in the Chilean city of Valparaiso, 33-year-old social worker Nayib Pineira said "everything is much more expensive". He said local gasoline prices have risen to 1,300 pesos per litre (1.42 euros per litre, $5.50 per US gallon) -- "nearly what Europeans pay, but with a European salary".

In Europe, natural gas prices have soared as Russia has slashed deliveries to countries that oppose the war.

Oil prices have jumped, too. The rise in energy prices has increased the costs of making and shipping an array of goods.