Ukraine-Russia: Conflicts and Consequences

Escalation of tensions would more likely result in political instability and downgrade Russia’s credit ratings and bond yields. This would further affect Russia’s growth prospects for the medium term causing a drag on investments. If sanctions are imposed, Russia cannot access the payment mechanisms and the U.S. banking system.  This will reduce exports as well as imports, stalling its economic growth.

Ukraine’s tourism sector has not recovered since the political conflict with Russia in 2014. The COVID-19 pandemic has further worsened the tourism sector’s growth. A possible invasion of Ukraine could lead to no recovery in 2022/2023, considering the security reasons. Increased government spending toward supply chain and military expenses weighs down on the funding allotted to public services and other dimensions to improve economy. This results in reduced competitiveness and sluggish growth in investments.