Just as it was emerging from the ravages of the Covid-19 pandemic, the Singapore economy has run into another unforeseen tail-risk event: the Russian invasion of Ukraine. The economic fallout from this war and the resulting sanctions on Russia have yet to fully play out. But in the two weeks since hostilities began, some economic shocks have already materialised. The immediate impact has come in the form of sharp increases in the prices of energy and food. With oil from Russia - which is the world's second largest oil exporter - struggling to find buyers in the face of sanctions and the blockage of maritime transit routes, a global shortage of energy has suddenly emerged. The price of oil hit a 14-year high of US$139 per barrel on Monday after United States President Joe Biden announced that the country would stop importing Russian oil, and Britain also pledged to phase out imports.

While oil prices have retreated since, most economists forecast that they will remain at least 30 per cent above their levels in 2021. With Russia and Ukraine accounting for about 30 per cent of global exports of wheat and 20 per cent of corn, the prices of these staples have also soared and are likely to remain elevated at least as long as the war continues. The prices of some base metals, of which Russia is a major exporter, have also risen.