How Does War Affect Emerging Markets?

战争如何影响新兴市场

刘立军 供稿

TRANSCRIPT

The current war in Ukraine has affected countries all around the world. But when it comes to economic impact, emerging markets in particular face added risks. Let’s look at why.

Russia and Ukraine are major commodity producers and the combination of sanctions and disruptions in production have led to a drop in supply. The result has been major global price hikes for food and energy. Wheat, for example, has reached record prices as Russia and Ukraine supply 30% of global exports. Oil and gas prices have soared as well.

These changes differ in impact across emerging markets. Some emerging market exporters, like the Gulf economies, stand to benefit from rising proceeds, while large importers of these commodities like Georgia, Egypt, and Poland could be badly hit. But these price rises are likely to increase inflation in all emerging and advanced economies.

And when the countries face high inflation, central banks are usually pressed to raise interest rates, which typically reduces demand and puts the brakes on GDP growth. This will set emerging markets back in their already slow recovery from the pandemic, while making it more expensive to pay their debts.

Higher interest rates in advanced economies and an increase in geopolitical risk could also lead investors to move capital away from emerging markets and towards advanced economies to chase rising, safer returns. This would result in emerging-market currencies depreciating, adding to the already accelerating inflation. It could also raise the cost of borrowing across emerging markets and increase the burden of debt. For countries that had high debt even before the war, this could be especially challenging.

Policymakers will need to navigate difficult trade-offs between managing inflation and debt levels, while also supporting vulnerable households and economic activity.

VOCABULARY

1. sanction n. (usually plural) an official order that limits trade, contact, etc. with a particular country, in order to make it do sth., such as obeying international law 制裁。例如：The economic sanctions have been lifted. 经济制裁业已取消。

2. disruption n. 中断

3. depreciate v. to become less valuable over a period of time 贬值；跌价。例如：New cars start to depreciate as soon as they are on the road. 新车一上路就开始贬值。

4. navigate v. to find the right way to deal with a difficult or complicated situation 找到正确方法（对付困难复杂的情况）。例如：We next had to navigate a complex network of committees. 我们下一步必须设法应对复杂的各级委员会系统。

5. trade-off n. 权衡；协调

QUESTIONS

Read the statements. Then listen to the news and decide whether the statements are true (T) or false (F). Then correct the false statements.

1. The current war in Russia has affected countries all around the world.

2. Russia and Ukraine are major commodity producers.

3. Russia and Ukraine supply 40% of global exports.

4. Some emerging market importers, like the Gulf economies, stand to benefit from rising proceeds, while large exporters of these commodities like Georgia, Egypt, and Poland could be badly hit.

5. The price rises are likely to increase inflation in all emerging and under-developed economies.

6. When the countries face high inflation, central banks are usually pressed to decrease interest rates.

7. Higher interest rates in advanced economies and an increase in geopolitical risk could also lead investors to move capital away from emerging markets.

8. Policymakers will need to navigate difficult trade-offs between managing inflation and debt levels.

KEY

Read the statements. Then listen to the news and decide whether the statements are true (T) or false (F). Then correct the false statements.

(F) 1. The current war in Russia has affected countries all around the world. （正确表达）The current war in Ukraine has affected countries all around the world.

(T) 2. Russia and Ukraine are major commodity producers.

(F) 3. Russia and Ukraine supply 40% of global exports.（正确表达）Russia and Ukraine supply 30% of global exports.

(F) 4. Some emerging market importers, like the Gulf economies, stand to benefit from rising proceeds, while large exporters of these commodities like Georgia, Egypt, and Poland could be badly hit.（正确表达）Some emerging market exporters, like the Gulf economies, stand to benefit from rising proceeds, while large importers of these commodities like Georgia, Egypt, and Poland could be badly hit.

(F) 5. The price rises are likely to increase inflation in all emerging and under-developed economies.（正确表达）The price rises are likely to increase inflation in all emerging and advanced economies.

(F) 6. When the countries face high inflation, central banks are usually pressed to decrease interest rates.（正确表达）When the countries face high inflation, central banks are usually pressed to raise interest rates.

(T) 7. Higher interest rates in advanced economies and an increase in geopolitical risk could also lead investors to move capital away from emerging markets.

(T) 8. Policymakers will need to navigate difficult trade-offs between managing inflation and debt levels.

(封面图片来源于摄图网，版权归摄图网所有）