The Economic Impacts of Russia-Ukraine War Export Disruptions of Grains and Metals

Abstract

We apply the GTAP multi-country computable general equilibrium (CGE) model to analyze the economic impacts of the major disruptions of exports of grains and metals from the combatants of the Ukraine War on their own economies and those of others. The simulation results indicate that these disruptions affect not only Ukraine and Russia but also generate significant cascading economic impacts both across other sectors and world regions. Of the two countries, our analysis indicates that export disruptions from Ukraine, will have the largest impact on its own economy, with a real GDP reduction of over $2.6 billion (or a 1.97% decrease). Other countries/regions, such as Russia, China, Rest of Former Soviet Union, Rest of Asia, and Africa, are estimated to experience much smaller reductions in GDP, with the world economy estimated to experience a $2.7 billion loss. In contrast the projected impact of its export disruptions on Russia’s GDP is only slightly over $300 million, and GDP impacts on the global economy are only slightly less than $400 million, primarily because Russia’s economy is relatively less dependent on exports and because of favorable terms of trade effects. This research is an initial step in a comprehensive assessment of the total impacts of the Russia-Ukraine War with regard to other trade policies and within the context of the lingering effects of the COVID Pandemic and other current issues affecting global supply chains.

Keywords: Ukraine War, commodity markets, economic impacts, computable general equilibrium analysis, supply chains

JEL Classification: F14, C68, Q17, F51