Countries around the world are battling huge surges in inflation levels, pushing up prices of goods from groceries to gas.
With countries still recovering from the economic impacts of COVID-19, and an increase in demand post-pandemic, Putin’s invasion of Ukraine has sent costs across the globe skyrocketing.
The European Central Bank cited the war in Ukraine as a key explanation for recent – and expected – spikes in inflation. In the coming months, inflation “depends crucially on how the Russian war in Ukraine unfolds, on the impact of current sanctions and on possible further measures”.
The crisis in Ukraine means that inflation is expected to remain high for the time being, according to the bank. Inflation is set to average 5.1% in 2022, 2.1% in 2023 and 1.9% in 2024.
In France, inflation reached a record high of 5.1% this March, according to the INSEE statistics agency. This is the highest INSEE has recorded since 1997.
The Netherlands and Belgium have also experienced particularly high inflation. The Consumer Price Index (CPI) in each country has soared in the past year. While the Netherland’s CPI increased by 6.4% over the last year, Belgium’s CPI leapt by 7.59%.
Spain was one of the only countries to reduce inflation. Although the country’s CPI rate was still high at 6.1% in February, this actually represented a 0.4% decrease over the past year.
Norway and Germany were the only other major European economies to reduce inflation. In Germany, the CPI fell by 0.4% and in Norway it dropped 1.9%. In Norway, it was rising energy costs that pushed up the CPI. Food and soft drink prices actually fell by 1.6% from January 2021.
In China, the Producer Price Index (PPI) increased by 9.1% last year. Reuters cited supply issues both within the country and abroad as the reason for China’s high PPI. However, unlike surging consumer costs in other countries, China’s CPI increased by only 0.9%.
High energy prices worldwide, coupled with low domestic demand, have contributed to both China’s high production costs but also their slowing inflation.
On the other hand, in the UK there was an increase in food, fuel and energy prices. The CPI was 5.9% for February, exceeding general expectations and beating January’s 30-year high.
The high inflation rate and CPI reflect the cost of living crisis that the UK is currently facing.
The USA has also been hit hard by inflation. In America, the CPI increased by 7.9%, the fastest pace of yearly inflation in 40 years. It is believed that March will continue to show high levels of inflation, when the full impact of the crisis in Ukraine is reflected in reports.
Like the UK, the USA is facing a rise in food and rent prices as well as soaring gas prices. The average price for a gallon of gas in the US was $4.32 last week, according to the AAA.
Food prices have also spiked, increasing by 8.6% over the past year, the largest annual increase since the year to April 1981.
Despite its rising prices, the USA is not the most expensive place to buy gas. Hong Kong has the most expensive gasoline price in the world at $2.88 per litre.
Rising gas prices are a direct result of rising oil prices, which have spiked as a result of the crisis in Ukraine. Russia supplies about 17% of the world’s natural gas and 12% of its oil.
With sanctions imposed upon Russia and major companies backing out of energy deals with the country, global supply chains have been disrupted and prices have gone up.
Despite this, Russia is actually the country in Europe with the lowest gas prices, at $0.48 per litre, according to data updated this March.
Food prices around the world also hit a record high in February. The Food and Agriculture Organisation (FAO) measures the monthly change in international prices of food commodities using the FAO Food Price Index (FFPI).
The FFPI averaged 140.7 points in February. This is 24.1 points higher than last year, representing a 20.7% year-on-year increase.
The FAO stated that the jump in the FFPI was partly explained by the crisis in Ukraine. The build-up to the invasion pushed energy costs up, which in turn affects food prices.
In addition to this, Ukraine and Russia make up roughly 80% of global sunflower oil exports. The FAO Vegetable Oil Index also reached a new high, with an 8.5% month-on-month increase in February. Fear of disruption to sunflower oil exports as a result of the Ukraine crisis further explain the record high prices.
Currently, Russia seems little affected and prices remain low, presumably explained by the fact that the country does not need to import these commodities.
An increase in demand post-COVID, coupled with the disruptions to supply chains due to the Ukraine crisis, has caused the recent surges in inflation and slowed down recovery after the pandemic.
Inflation is expected to remain high until supply chains stabilise and while the world is still dealing with the aftermath of the COVID-19 pandemic and the crisis in Ukraine.