Russia’s invasion of Ukraine poses risks of inflationary pressures and external sector risks to the Fijian economy – Dr. Neelesh Gounder
Lecturer in Economics at the University of the South Pacific, Dr. Neelesh Gounder
University of the South Pacific lecturer in economics, Dr Neelesh Gounder, said the Russian invasion of Ukraine poses risks of inflationary pressures and external sector risks to the Fijian economy.
Shortly after Russian President Vladimir Putin authorized military operations in eastern Ukraine, crude oil prices soared to just over $100 a barrel.
This is the highest since 2015 and represents an increase of almost 40% since December 2021.
Gounder says the rise is mainly due to the strong possibility of supply disruptions in the short to medium term, which puts pressure on oil prices to rise as distributors increase demand to increase inventories. .
He says what happens in the crude oil market has implications for the global economy and therefore no economy is immune to this impact since all petroleum fuel is produced from crude oil .
For Fiji, any increase in world crude oil prices, particularly through the increase in average refined product prices in the Singapore trading market, poses inflationary risks due to an increase in gasoline and diesel.
Next come shipping costs and supply chain issues related to COVID-19, which also add to the price pressure. These also present external risks to the Fijian economy, such as those arising from our trading partners.
He further added that member governments may be tapping into the US Strategic Petroleum Reserve (SPR) to ease short-term supply disruption pressures.
However, it is not clear how long the global tensions resulting from the Ukraine crisis will last.