According to the International Monetary Fund, the conflict in Ukraine would continue to put downward pressure on commodity prices, hurting oil and gas prices in 2022 and food prices in Nigeria and other countries well into 2023.
This was revealed in the Washington-based lender’s ‘World Economic Outlook: War Sets Back the Global Recovery April 2022’ study.
Inflation is anticipated to continue high for far longer than previously forecasted, according to the report.
“With the impact of the Ukraine conflict and increasing pricing pressures, inflation is projected to remain elevated for longer than previously forecast,” it stated.
The battle is expected to have a long-term influence on commodity prices, with oil and gas prices likely to rise in 2022 and food prices likely to rise far into 2023. (because of the lagged impact from the harvest in 2022). Inflation is expected to be 5.7% in advanced economies and 8.7% in emerging market and developing economies in 2022, respectively, up 1.8 and 2.8 percentage points from the January World Economic Outlook.
“Inflation in advanced economies is expected to be 2.5 percent in 2023, while emerging market and developing economies are expected to be 6.5 percent” (0.4 and 1.8 percentage points higher than in the January forecast). However, like with the economic outlook, these inflation projections are fraught with uncertainty.”
Energy and food costs, according to the IMF, contributed significantly to headline inflation in 2021, with variable degrees of contribution across regions. The sharp increase in oil and gas prices, according to it, resulted in an increase in energy costs.
“These increases were the primary driver of headline inflation in Europe and, to a lesser extent, the United States,” the report stated.
“Rising food prices had a big influence in most emerging market and developing economies, as adverse weather hampered harvests and rising oil and gas prices drove up fertilizer costs. Increased costs for foreign food commodities have varying effects in different nations, based on the proportion of food in households’ consumption baskets and the sorts of foods eaten.
“Households in low-income nations are particularly vulnerable to price changes in staple cereals, as their diets are generally dominated by a single grain.” Food inflation has been virtually entirely driven by rising food costs in low-income nations where wheat, corn, and sorghum comprise a substantial part of the diet (particularly in Sub-Saharan Africa).”
Food inflation is predicted to be robust by 14% in 2022, before dropping by a little fraction in 2023, according to the report, with commodity price increases expected to continue through 2022 before relaxing in some ways in 2023.
