Keon Clark M.

Lanto BS Accountancy (ACC221)

THE CONNECTION BETWEEN THE UKRAINE-RUSSIAN WAR AND THE PHILIPPINES'

ECONOMY AND ITS EFFECT TO THE LIVELIHOOD OF FILIPINOS

I. INTRODUCTION

The war that arose between Ukraine and Russia during the early 2022 testified to a
contemporary world disorder and is a devastating news that brought global economic crisis.
These indicate that the diplomatic ties between the two countries is non-existent which is not
totally unexpected. Russia and Ukraine's relationship were already fragile way back in 2014. In
January of 2021, the Ukrainian President Zelensky's requested to be accepted and be part of
NATO which provoked Russia and eventually deployed their troops at their borders disguised as
training exercise which caused great tension between the two countries and eventually led to
Russian's special military movement towards Ukraine (Wiseman, 2022). And through the
leadership of Vladimir Putin, Russia moved to a more aggressive approach and started a
extensive invasion towards Ukraine, with the capital Kyiv as their primary target.

Due to several modern democracies exploiting the situation to threat to impose and enforce
dramatic sanctions in a chance of making the Russian President Vladimir Putin change his plans
and course of action, it has led the authoritarian leader to designate those countries as an
unfavorable country. Given that the United Nations has no restriction law that can bind Moscow
from its invasion towards Ukraine, unfolding a new discussion is the course of action they took to
talk about whether the international system should transform for better or for worse. The results
of this discussion are reflected through the issuance of the United State President Joe Biden of
an executive order that limits trade and financial transactions from Ukraine and Russia and the
blocking of assets of Russian financial institutions.

The prevailing perception around the world is that the global financial sanctions imposed on
Russia, along with the seizure of assets and properties belonging to President Putin's oligarch
friends, will weaken the Russian economy and thwart any further attack on Ukraine. This is the
rational situation however the crisis' impact extended to the global economy and eventually lead
to Philippines which directly affected their economy and the livelihood of its citizens.
 During the six years term of the former Philippine President Rodrigo Duterte, the country has
managed to diversify its relations with countries that is outside its traditional partners, such as
China and Russia. This resulted to Philippines ruining its long-term partnership with U.S strategic
relations. Moreover, during Duterte's term the Philippine-Russian relations have significantly
improved and managed to closed some deals that is vital for the Philippines' economy. According
to academics, the relationship is likely to continue, and poses a chance for a significant growth
and a by-product that might be useful for the Philippines' structural shift toward a multipolar order.

The impact of the recent war between Russia and Ukraine to the future trajectory of economy
is very evident. Though the relationship of Philippines between those two countries is not too tied
up. During the previous presidential term, they are unable to attain the full potential o bilateral
relations so the relations are unlikely to collapse from a huge fall. In spite of this relation, there
are still existing adverse impacts that this European crisis pose in short and long term.

II. DISCUSSION

The tension that brewed in Ukraine came to a conclusion after the Russian military forces
commenced an operation last February 2022. These two belligerent nations are halfway across
the globe and were confine regionally, but the crisis they impose had direct effect on the livelihood
of the Filipinos and became even more destructive. Though the government authorities have
assured Filipino that the impact is minimal especially that Philippines' ties between the two
countries are not confined so there are narrow trade and banking exposure, “Remittances from
the conflict zones are also small compared to inflows from the rest of Europe and the world”
(Wiseman, 2022).

What does the invasion of Russia towards Ukraine mean for the Economy and Livelihood of
Filipinos?

Economy

With the recent invasion attempt of Russia on Ukraine and intense economic impact on
Russia due to financial sanctions released on it, “are not only inflicting an economic catastrophe
on President Vladimir Putin's Russia. The repercussions are also menacing the global economy,
shaking financial markets and making life more perilous for everyone” (Wiseman, 2022). This
crisis between Ukraine and Russia is a world economic trigger as they are major suppliers of
several major products combined such as wheat, gas, metals, and etc. Russia-Ukraine crisis did
not directly affect the local economy since neither country is a major trading partner of the
Philippines (Dominguez, 2022). These unintended impacts are felt through four major sectors
such as the commodities market, financial sector, stocks, and the effect on the country's fiscal
health. All whilst, the World Bank reduced the Philippines' growth forecast to 5.7% from 5.8%. In
the worst-case scenario, the forecast is 4.9%. The figures are lower than the Duterte
administration's aggressive GDP growth target of 6% to 7% for 2022.

Simply put, the collective indirect impact of the Ukraine-Russia conflict would slow the
Philippine economic recovery. While we do not directly trade with Russia or Ukraine, the
consequences of their actions can have an impact on us. Our country's worst-case scenario is
economic collapse. The impact of the war, according to Finance Secretary Carlos Dominguez, is
like a "ricocheting bullet," and the Philippine economy is "collateral damage." Despite this
possibility, Dominguez remains optimistic that the Philippines has enough economic tools to get
through the crisis.

Livelihood of Filipinos

In a report issued by world bank, the multilateral lender said that while the Philippines'
dependence on Russia and Ukraine in terms of goods and services, and the capital is limited, the
sanctions related to the invasion forced up international prices of food and fuel, which devastated
consumers' livelihood and economic growth. The first sector that is greatly affected is agricultural,
given that the two warring countries are major wheat supplier. In the Philippines, according to
World Bank estimations, if wheat prices rose 10% on average over the year, poverty incidence
would rise by one percentage point, or 1.1 million people. These are people who have a daily
income of $3.20 (P163.81) or less.

Due to financial sanctions and the limitation of trade between the two regions, the supply of
wheat products greatly declined which caused significant increase in prices and impact citizen's
income. This was also noted by the World Bank, stating that “As we would expect, relatively import
dependent Philippines, China, and Thailand, see a contraction in real income – of between 0.5%
and 1.5% – while the net exporter, Malaysia, sees an increase in real income of 0.3%.” These
sudden changes caused inconvenience to consumers and forced them to find alternatives to fulfill
their basic commodities. This was also addressed by the government by distributing subsidies an
aid for indigent households to minimize the impact of the crisis, but it was also acknowledged by
the former presidential team that the aid is too small and not enough for the citizens (Rivas, 2022).
 Knowing that Russia is known as the ‘world's largest supplier of wheat and in combination
with Ukraine, both countries account for almost a quarter of the sum of the global export (Cohen
& Ewing, 2022). People suffer from acquiring wheat goods as its price increased greatly. The
natural gas supply in the country is arguably the most afflicted sector as it is evident as the prices
of gas prices increase continuously. It is fostered and raised in the senate, “22 percent increase
in gasoline prices to Php 77.71 per liter in May from PHP 63.58 per liter in January and diesel
pump prices soared by 49 percent to 75.92 per liter in May from PHP 50.95 per liter in January
(Gatchalian, 2022).” During this crisis, many public utility drivers decided not to comply to the
prescribed fare in jeepneys, bus, and even tricycles and some decided to halt their operations
overall which caused a commotion to daily commuters. Moreover, these circumstances affected
businesses that incorporates gas such as food stalls and restaurants, which pushed them to
increase their pricing for the services and products they offer (Rivas, 2022).

Given that there is a conflict between Ukraine and Russia, does the former President
Rodrigo Duterte's decision to pursue diplomatic relationship with Russia still convenient?

The relationship between Philippines and Russia is unlikely to crumble from a huge
foundation mainly because the existing connection between the two is not deeply tied together.
This is despite the truth that the ongoing crisis had a negative impact on the Philippines. First, the
Russian government lack definite power to directly influence the Philippines and only have a soft
bilateral connection with one another. As of now, the Philippines has made a decision: it
condemned Moscow's invasion of Ukraine at the UNGA and urged both parties to resolve their
differences peacefully. President Duterte has admitted that the country should be wary of Putin's
"suicidal" policies in Ukraine, and that if the conflict "spills over" into Asia, he is willing to offer US
facilities in the archipelago. The Philippines faces no high-stakes fallout from the Ukraine conflict
in its bilateral relations with Russia. While Manila has made a "moral decision" to condemn the
invasion, this decision is consistent with its strategic interests. It is crucial to recognize trends in
how nations like the Philippines act in a way that preserves the Thucydidean principles of fear,
honor, and interest as the ongoing Russo-Ukrainian War leads to systemic changes on a global
scale (Espeña, 2022).

III. CONCLUSION

The study examined the global and Philippine economic impact of Russia's invasion of
Ukraine. This implies that the invasion's impact on the world economy was a disruption of the
worldwide supply chain. Disruptions to the trade and energy supplies made this obvious. It caused
an increase in the cost of energy, commodities, and food, which in turn caused an increase in
worldwide inflation in several nations. The implication is that geopolitical conflicts frequently have
economic effects that spread to other nations and do not only affect the sanctioned country. The
conflict between Russia and Ukraine has demonstrated that imposing sanctions on a belligerent
nation is not the best course of action because it affects non-belligerent nations as well,
particularly when those non-belligerent nations are trading partners with the belligerent nation.

Economy. Such is the case in the Philippines, even though the relationship with the
country to the warring nations in the west is not that connected deeply. The war between Ukraine
and Russia will have a cumulative indirect effect that will hinder the Philippine economy's
recovery. Even while the government don't trade with Russia or Ukraine directly, spillover effects
can still have an influence on us. A negative impact on the economy is the worst-case scenario
for our nation. The crisis has heightened geopolitical concerns, which will have a negative impact
on the Philippines' economic situation in 2022. Several models predicts that these effects will
have a considerable negative impact on GDP and a positive impact on inflation, aggravating the
trade-offs in Philippine policy.

Livelihood of Citizens. The terror of the conflict and the aftermath it has brought is greatly
felt by the Filipinos. The projected poverty rate increased to a notable amount enough to make
the government prepare intensive precautionary measures for the worst possible scenario.
Moreover, many consumers are suffering the consequences of the increase in wheat products
forcing them to find and settle for alternatives that they can afford. Price increases for essential
commodities are another domino effect of rising oil prices. While we may have safety nets in the
short term, the protracted conflict casts doubt on our economy's future and the faith of consumers.

IV. RECOMMENDATIONS

With the data and findings taken into consideration, the following suggestions present
recommendations for future activities:

1. Political leaders should make an effort to prevent crises like the one between Ukraine and
Russia and should adopt discussion as a method of resolving disputes.
2. If Russia chose to respond by punishing the west with export restrictions, policymakers in
the Philippines, which heavily depends on Russia for essential commodity imports, should
 begin discussions on alternate means of survival and, if feasible, support "onsite"
production of commodities.
3. Future research can evaluate how well discussions can settle disputes and appease
nations who start wars to maintain their regional influence.
4. Further research could focus on the political and socio-political aspect of the crisis.

V. REFERENCE

Cohen, P., & Ewing, J. (2022, February). What’s at stake for the Global Economy as Conflict
Looms in Ukraine. The New York Times.
https://www.nytimes.com/2022/02/21/business/economy/Russia-Ukraine-economy.html

Dominguez, C. D. (2022, March 8). Effects of Russia-Ukraine conflict temporary, measures in

place to cushion its impact. Department of Finance. https://www.dof.gov.ph/effects-of-russia-
ukraine-conflict-temporary-measures-in-place-to-cushion-its-impact-dominguez/

Espeña, J. (2022, March 25). How the Russia-Ukraine War Will Impact Philippines-Russia
Relations – The Diplomat. The Diplomat. https://thediplomat.com/2022/03/how-the-russia-
ukraine-war-will-impact-philippines-russia-relations/

Gatchalian, Sen. W. (2022, August). Impact of Russia-Ukraine war on PH energy Assessed.

Philippine News Agency. https://www.pna.gov.ph/articles/1180613

Rivas, R. (2022, April 5). Russia-Ukraine war may worsen poverty in Philippines – World Bank.
Rappler. https://www.rappler.com/business/world-bank-sees-russia-ukraine-war-likely-
worsening-poverty-philippines/

Wiseman, P. (2022, March 2). Economic dangers from Russia's Invasion ripple across globe.
AP NEWS. https://apnews.com/article/russia-ukraine-vladimir-putin-coronavirus-
pandemicbusiness-health-9478a9825c9abfde5f6505bd34b2998