The scope of reduction in global inflation

Written by The Frontier Post

The UN Food and Agriculture Organization (FAO) has informed the world that after reaching an all-time high in March amid repercussions from the war in Ukraine, world food prices have decreased significantly in April 2022. According to reports, the FAO food price index averaged 158.2 points in April, down 0.8 percent from the surge in March, but remained nearly 30 percent higher than in April last year. The FAO index tracks monthly changes in the international prices of the basket of food commodities while the recent decrease was led by a slight decline in the prices of vegetable oils, cereal, sugar, milk, and other commodities in the last month.

There had been unprecedented inflation across the globe during the past months after the emergence of the COVID-19 pandemic followed by the eruption of the Russia-Ukraine war, which not only hindered the global supply chain but also shattered the global economy. Well before the Russian aggression on Ukraine, the Central banks of most nations were fighting a severe upsurge in inflation due to the pandemic, stressed global supply chains, contraction of labor markets as well as increasing poverty in their countries. Russia is one of the largest suppliers of oil, gas, and food staples while Ukraine is one of the biggest exporters of the food grains, therefore the war in Ukraine has disrupted the supply of these valuable commodities to the world. Earlier, the FAO Chief said that the Food Price Index had touched 159.3 points in March, up 12.6 percent from February, which was the highest level since its inception in 1990. According to statistics, the prices of necessities were 33.6 percent higher in March as compared to the corresponding period in 2021.

In fact, the increase in energy prices over the past two years has been the largest since the oil crisis in 1973. The massive increase in prices of food commodities, energy, reduced production of farming, and fertilizers had spoiled the pace of the development, affected the living conditions, and reduced the purchasing power of the masses throughout the globe while the poorest hit the hardest. Although there had been a decline in inflation in the month of Ramadan which was a momentary phenomenon due to the conclusion of the harvesting season in some parts of the world, however experts do not expect the continuation of this trend in the coming months because the worsening geopolitical situation in Ukraine is less likely to improve in near future while COVID-19 pandemic is again taking momentum in few provinces of China. Furthermore, the World Bank Group’s latest commodity market outlook report confirmed the apprehensions of the economists that the current geopolitical and geoeconomics of the contemporary world are likely to keep the prices of commodities at high levels throughout the end of the year 2024.

Based on these facts, the analysts fear continuous spillovers of war in Ukraine, which can bring periodic or permanent supply shocks in the global supply chain in the coming months that will not only move the businesses, manufacturing, and development activities in different geographical zones but also add to inflation and poverty in the world. Therefore, nations around the world must keep in place the economic and monetary measures to deal with the challenge of rising global inflation in the future.

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