Impact of Russia Ukraine Conflict on Singapore Economy
The conflict between Russia and Ukraine has impacted the entire world and Singapore is no exception. Tensions between the two countries could impact the global economy and contribute to rising living costs.
Despite Singapore’s limited ties with Russia and Ukraine, Singapore has an import value of $1.32 Billion from Russia, out of which $1.09B is “Refined Petroleum.” Hence, any prolonged political disaster or war would highly impact the Singapore economy, mainly its businesses.
From fuel prices to food inflation, we look at how the Russia and Ukraine war has affected the Singapore Economy.
1. Higher pump prices
Russia, after Saudi Arabia, is the world’s second-largest oil exporter, shipping approximately five million barrels of crude oil per day.
As the crisis worsened, it triggered an energy crisis, driving up oil and gas prices.
The Russia-Ukraine conflict has aggravated price volatility through supply-chain disruptions, trade restrictions, and sanctions. With Russia being the world’s second-largest oil exporter and Singapore importing a significant share for its energy needs, Singapore hasn’t been immune to the skyrocketing petrol prices leading, inter alia, to taxi operators raising fares.
2. Supply chain disruption and further inflation risk
Global supply chains had already been hammered by the Covid-19 related challenges and have been further dislocated by geopolitical tensions, the Russia-Ukraine conflict.
Western nations have imposed sanctions on Russia, hurting their economy and trade partners, which rely on its energy imports.
Furthermore, tensions and sanctions have also yielded in energy supply disruptions and hampered the already burdened supply chains, leading to further inflation risks.
Unlike bigger countries, Singapore faced limitations in on-shoring supply chains.
3. Increase in electricity costs
In recent months, high energy costs have troubled global markets, with gas reaching new highs.
In Singapore, most households have experienced higher electricity bills since Jan 2022, with the electricity tariff going up by more than 5% on the back of rising fuel prices.
4. Higher food inflation
The situation in Ukraine has influenced inflation expectations, with prices of food staples such as wheat and corn skyrocketing.
Ukraine is the world’s third-biggest maize exporter and fourth-largest wheat exporter, with Russia being the world’s largest wheat exporter.
In January, food inflation was one of the critical causes of increasing consumer prices in Singapore, up 2.6 percent year on year due to higher inflation for non-cooked and prepared foods.
How will this impact businesses in Singapore?
The price of several goods in Singapore may rise due to Russia’s hostilities with Ukraine.
The influence of the Ukrainian crisis extends beyond oil and gas prices because oil and gas are “inputs” into the more significant energy sector.
Oil refining produces gasoline and natural gas, which are widely utilized in energy generation in many nations, including Singapore, which relies mainly on natural gas for power generation.
Increased oil costs have impacted many businesses in Singapore.
Food Industry:
Russia and Ukraine are essential exporters of barley, maize, and sunflower seeds, among other items, and account for over 25% of global wheat production.
Tensions between the two countries may raise the cost of agricultural output in the global food market by raising fuel and fertilizer prices, reducing harvests, and increasing transportation expenses
Metal Industry:
Metal shortages will drive up the cost of metals and items derived from them.
Russia exports over half of all nickel, palladium, aluminum, and platinum in the world (49 percent, 42 percent, and 26 percent, and 13 percent respectively) (13 percent ). Steel and copper are also important exports for the country.
Ukraine produces 70% of the world’s neon, 40% of krypton, and 30% of xenon, all of which are needed to make microchips.
Supply disruptions in these commodities might have a big impact on the manufacturing industry, which makes stainless steel, sensors, transistors, and chips.
Agricultural Industry:
The conflicts would worsen strains in global supply as Ukraine is one of the largest suppliers of food grain, second only to the US. Russia and Ukraine together export a quarter of the world’s wheat.
Dr. Ghosh, the principal investigator of the DBS-SKBI Singapore Index of Inflation Expectations project, stated that a pause in manufacturing and production would lead to higher prices of Agriculture supply. Moreover, the higher cost of natural gas, the main fertilizer component, could increase crop prices.
Food prices could see triple-whammy effects from rising fuel prices, reduced production because of conflicts and delivery bottlenecks, and supply chain problems caused by the resulting sanctions.
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Frequently Asked Questions
Ukraine’s main exports to Singapore are raw iron bars ($61 million), hot-rolled iron ($46.9 million), and other steel bars ($19.8 million).
Russia’s main exports to Singapore were refined petroleum ($1.09 billion), crude petroleum ($68.3 million), and raw nickel ($37.9 million).
Russia is the world’s second largest oil exporter, and Singapore imports $1.09 billion in Refined Petroleum from Russia.
