The war in Ukraine is breaking the momentum of global recovery. It should cut global growth by around 1 percentage point and inflate inflation by 2.5 points, according to estimates by the Organization for Economic Co-operation and Development (OECD), published on Thursday 17 March. “The crisis is already manifesting itself in rising prices for energy, food and some metals,” underlines Laurence Boone, the chief economist of the OECD. The Paris-based organization, which last December forecast global growth of 4.5% in 2022, canceled the publication of its forecasts, scheduled for early March, due to the high uncertainties weighing on the economy.
Fears of a shortage of wheat, of which a third of the world’s exports come from Ukraine and Russia, have caused prices to jump. They soared by 70%, a few days after the Russian military offensive, when they had already doubled over the past two years. The OECD anticipates, for 2022, a drop in wheat exports in the world, between 7% and 12%, and between 5% and 7% for other cereals. These tensions on the markets lead to an increase in the food price index, the benchmark indicator established by the United Nations Food and Agriculture Organization, today at record levels. This exceeded 140 points in February, while it was close to 90 points in 2016.
Shortages
An increase that raises fears of worsening food insecurity in the regions of Africa and the Middle East, where countries like Egypt import 80% of their wheat from Russia and Ukraine. “However, it is possible to partially compensate for the decline in Russian and Ukrainian exports by increasing spring grain crops elsewhere and avoiding export restrictions,” esteem Mme Boon. These restrictions have multiplied, increasing the risk of shortages. After Hungary and Moldova, Russia announced on Wednesday March 16 that it wanted to limit its wheat exports to guarantee its food security.
At the end of February, the price of a barrel of oil also rose to 139 dollars (126 euros), a level not reached for ten years, before falling back below the 100 dollar mark. Having emerged weakened from the Covid-19 pandemic, the countries of the South have much less budgetary room for maneuver to cushion this shock. Their inhabitants feel the rise in prices hard, with a share of their expenditure devoted to energy and food much higher than elsewhere. “Sharp increases in food and fuel costs could heighten the risk of unrest in some regions, from sub-Saharan Africa and Latin America to the Caucasus and Central Asia”warns the International Monetary Fund (IMF), in a note published on Tuesday 15 March.
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