FMI: War-Fueled Surge in Food Prices to Hit Poorer Nations Hardest (IMF bulletin, March 16, 2022)

War-Fueled Surge in Food Prices to Hit Poorer Nations Hardest (PHOTO: IMF PHOTO/YAM G JUN)

By Christian Bogmans, Jeff Kearns, Andrea Pescatori and Ervin Prifti Global food prices are poised to keep climbing even after jumping to a record in February, placing the heaviest burden on vulnerable populations while adding to headwinds for the global economic recovery. Food commodity prices rose 23.1 percent last year, the fastest pace in more than a decade, according to inflation-adjusted figures from the United Nations Food and Agriculture Organization. February’s reading was the highest since 1961 for the gauge tracking prices for meat, dairy, cereals, oils, and sugar. Now, the war in Ukraine and sanctions on Russia are upending shipments and possibly production for two of the world’s largest agricultural producers. The two countries account for nearly 30 percent of world wheat exports and 18 percent of corn, most of which is shipped through Black Sea ports that are now closed. Wheat futures traded in Chicago, the global benchmark, recently rose to a record. The Chart of the Week shows how price shocks will have worldwide impact, especially on poor households for whom food is a higher share of expenses. Food costs account for 17 percent of consumer spending in advanced economies, but 40 percent in sub-Saharan Africa. Though this region is highly import-dependent for wheat, the grain constitutes only a minor share of the total caloric needs. Differences in diet are also significant. In Europe, where bread is deeply embedded in many aspects of its culture, wheat makes up about a quarter of diets. In Southeast Asia, wheat accounts for only 7 percent versus 42 percent for rice, for which price increases so far have been relatively contained. Country-level averages, however, mask substantial differences within nations as poor households tend to eat more cereals but less meat, vegetables, and fruits compared with middle-income households. Finally, disruption may be even greater for countries with close trade links to Russia and Ukraine, including in Eastern Europe, the Caucasus, and Central Asia. High wheat prices will weigh even more on economies in the Middle East and North Africa, such as Egypt, which are especially reliant on Russian exports. Looking forward, reduced fertilizer supplies and higher oil prices will increase costs for harvesting, transporting and processing food. Policymakers must prevent those pressures from fueling food insecurity by avoiding protectionism and increasing social assistance for the poorest. The world may also call upon the two largest economies if the situation worsens. In the United States, where about 40 percent of corn production goes to ethanol, policymakers could reassess that use. And China, which holds more than half of global wheat and corn reserves, could consider releasing supplies to lower prices. ******

 

A inflacao tem caido em todo o mundo - World Bank

March 2019. 486 pages. English Version. Paperback. ISBN: 978-1-4648-1375-7. Price: $55 View PDFhttp://t.newsletterext.worldbank.org/r/?id=h342fc9d,1e3d924,1e3ed34 Now Available! This is the first comprehensive study in the context of EMDEs (Emerging and Developing Economies) that covers, in one consistent framework, the evolution and global and domestic drivers of inflation, the role of expectations, exchange rate pass-through and policy implications. In addition, the report analyzes inflation and monetary policy related challenges in LICs (Low Income Countries). The report documents three major findings: In First, EMDE disinflation over the past four decades was to a significant degree a result of favorable external developments, pointing to the risk of rising EMDE inflation if global inflation were to increase. In particular, the decline in EMDE inflation has been supported by broad-based global disinflation amid rapid international trade and financial integration and the disruption caused by the global financial crisis.

Evolution of inflation

Source: Haver Analytics, ILOSTAT, IMF International Financial Statistics and World Economic Outlook databases, OECDstat, UNdata, World Bank. A.Median headline and core year-on-year inflation for 41 economies, including 16 EMDEs (see details in Database Annex). B.Median year-on-year consumer price inflation for 29 advanced economies and 123 EMDE (including 28 LICs). C.Solid line shows median year-on-year headline inflation and dotted lines refer to interquartile range, based on 28 LICs.

Second, inflation expectations continue to be less well-anchored in EMDEs than in advanced economies, although a move to inflation targeting and better fiscal frameworks has helped strengthen monetary policy credibility. Lower monetary policy credibility and exchange rate flexibility have also been associated with higher pass-through of exchange rate shocks into domestic inflation in the event of global shocks, which have accounted for half of EMDE exchange rate variation. Third, in part because of poorly anchored inflation expectations, the transmission of global commodity price shocks to domestic LIC inflation (combined with unintended consequences of other government policies) can have material implications for poverty: the global food price spikes in 2010-11 tipped roughly 8 million people into poverty. http://t.newsletterext.worldbank.org/r/?id=h342fc9d,1e3d924,1e3ed34

A Economist sintetiza a situação brasileira num simples gráfico

PIB em baixa, inflação em alta:

Brazil’s annual rate of inflation rose to 10.5% in November, the highest it has been in 12 years. In a further blow to the embattled government Moody’s downgraded all its ratings for Petrobras, the country’s state-owned oil company, which is at the centre of a corruption scandal, and warned Brazil’s sovereign rating was at risk because of the country’s “worsening governability”.