In the Czech Republic, we are experiencing more than 17 percent inflation. Energy prices in particular have risen and continue to rise in an unreal way. To what extent is this really a consequence of the war in Ukraine?? Things don't go to war, which would occur, even if there was no war?
Until recently, say by the middle of this year, in the Czech environment, the large infusion of money into the economy in recent years had a huge impact on the level of inflation, and also to some extent, especially last year, poor regulation of the energy market, see the case of Bohemia Energy and other distributors.
And then it was all about Europe and its renewables policy and its naive reliance on gas as a transformation medium, before we have enough renewable resources.
Recently, however, it has been dominantly the result of Russia's war against Ukraine, more precisely, the Russian manipulation of gas prices, that it closes the taps to some countries, some for a few days, some for a long time.
And it's not just Bulgaria anymore, Poland, Finland, Baltic countries, that's also france, and the dramatic reduction of the flow of gas, for example to Germany repeatedly, which makes the markets very uncertain, and the price of gas is skyrocketing, which none of us even expected. So it's deliberate manipulation.
Unfortunately, so does Europe, quite unfortunately, has a gas-based electricity pricing policy. On that gas, whose prices are rising the most.
Although in our country almost all electrical energy is produced from sources other than gas, and in many other European countries as well. So, increasingly, and already dominantly in the last two months, it is the result of war.
If the war lasts a long time, and the signs are like that, that this is quite a realistic option, what other economic consequences it will have? What else do we have to prepare for??
If Russia continues to manipulate food prices that, that prevents the export of important commodities from Ukraine – Ukraine is a huge supplier of wheat, maize, especially sunflower oil in general to Europe, south asia, but mainly to Africa, some countries actually rely on it.
Again, this may cause further increases in the prices of food raw materials, which poor African countries cannot afford, and it will cause a huge debt crisis there, but also a huge social crisis, and this can trigger a large migration.
Effectiveness of sanctions
One of the Western responses to the Russian invasion was and is economic sanctions, even though more and more packages were coming, the Russian economy did not collapse after half a year. How is it possible?
Well, she didn't collapse, The Russian economy is not the standard of living in Moscow and St. Petersburg. The rest of the country is completely different and people are used to living in conditions, in which no one would live with us anymore. Basically in terms, I do not know, perhaps comparable with us 50. flights, but rather not even that.
Besides, we can't really trust Russian information, which Russia releases about itself, but now and then some realistic information gets out even from Russian sources.
In mid-April, the Governor of the Russian Central Bank drew attention to this, that from the third quarter of this year the Russian economy will have huge problems.
Then more senior economic representatives repeated it in June at the St. Petersburg forum. In other words, they are the very high representatives of the Russian economy, the Russian state.
A week before, at the beginning of June, The State Duma approved the takeover of government control over all bank accounts.
This is not just breaking bank secrecy, this is the impact of prices on the availability of accounts and also information, which can independently deal with accounts, so the world is learning about it very hard, how is the Russian economy really doing?.
But 19 leading economists from Yale University, very prestigious universities, did a lot of work and published a study this month, which says: the Russian economy will already fall by tens of percent this year and will continue to fall. They expect a drop of possibly up to 40 % in the near future, before the war is over.
Against the state before the start of aggression against Ukraine, they are waiting for a drop o 30 years in the Russian economy and sees the departure of Western companies as the main reason, which accounted for a huge share of Russia's gross domestic product, and also the unavailability of technologies, which Russia needs for its own industry, also for the mining industry and of course for the military operation.
So the Russian economy is in big trouble, but it is unlikely to provoke the Russian population to do so, to turn against her leadership.
Renewal as an opportunity
Czech politicians talk about it, that the reconstruction of Ukraine after the war can be an economic opportunity for the Czechia, for Czech companies, for the Czech economy. How big is the opportunity from your point of view and which fields in the Czech Republic can it help the most?
The opportunity will be huge, when the war is over. But it has to be said, that it's one thing to help keep Ukraine operational, at least that way, to be able to produce something and to sustain society. Schools are needed, kindergartens, so that children can go to school, to kindergartens, transport.
And the second thing is really economic reconstruction. To make it happen, so the war must be ended, because the big money of the investors will not go to the territory, which is still being fought over.
In addition, Ukrainian sources also say, that some parts of Ukraine there, where it is fought, front lines, they are so destroyed, that they are essentially non-renewable, that restoration will not be possible until many decades from now.
Fortunately, Ukraine is a huge country and territories affected in this way, mined, heavily contaminated, they are a small part of Ukraine. As for the economic opportunity, this is a huge opportunity.
Europe needs and will need to relocate much of its industry, which was now supplying the European market and European manufacturers from China, somewhere closer. From this point of view, Ukraine also has an excellent opportunity for this, to build a subcontracting supply industry there.
Many Ukrainian cities will need to be rebuilt, and those cities can be built from the ground up like this, as he needs it 21. century, and moved 19. or 18. or neither 20. So there is really room for every area, for all industries, from education to heavy industry.