IMF forecasts more food price increase
The US sanctions on Russia and Belarus, the conflict in Ukraine and climate issues are factors contributing to global food price increases.
Global food prices will likely increase in the coming months due to the conflict in Ukraine, sanctions on Russia and Belarus, and climate issues, according to the International Monetary Fund (IMF) on Tuesday in its WEO - the World Economic Outlook.
"Prices of agricultural commodities are likely to rise further - particularly wheat and, to a lesser extent, corn. These changes will add to already soaring prices of staple foods and mean that disruptions to Russian exports may be windfalls for other commodity exporters," the report said.
Ukraine and Russia, which share the Black Sea, are the world's breadbasket: they provide collectively 28% of global wheat exports. Russia and Belarus, in parallel, provide 40% of potash, an important fertilizer.
The IMF warned that most of the world - even high-income countries - are affected by the price hikes as a result of the conflict in Ukraine and the sanctions.
The report, however, contended that Asia would be able to mitigate the negative effects of the decreasing price of rice, allowing the region to mitigate the cost of living, which has been on an increase for consumers residing in low-income countries.
"Looking ahead, commodity price increases are expected to persist through 2022 before easing somewhat in 2023," it added.
Wheat prices have increased by 26.4% due to a sweeping drought in Canada and wheat-producing areas in the United States, according to the IMF.
Wheat is not the only thing on the rise.
Oil prices, according to the IMF, will also be increasing in 2022 by almost $30, reaching $106.83 per barrel.
"The average price of oil in US dollars a barrel was $69.07 in 2021; the assumed price, based on futures markets, is $106.83 in 2022 and $92.63 in 2023," the report said.
Between August 2021 and February 2022, crude oil prices have increased by 36% due to a strong recovery in oil demand, the short-lived effects of Omicron in late 2021, and geopolitical tensions in Ukraine.
Additional oil production capacities along with the release of petroleum reserves will likely mean that these increases will be contained over the medium term, the IMF said.
IMF director warns of global inflation shock
Last week, the head of the International Monetary Fund issued a warning of a global inflation shock, which is caused by the war in Ukraine and the ongoing COVID-19 pandemic slowing down economic growth this year and the next.
IMF managing director Kristalina Georgieva said the IMF, a fund based in Washington, would lower its global economic growth predictions for the years 2022 and 2023 due to the war in Ukraine, entailing the increase in the price of food, energy, and other essential commodities around the world.
"We are facing a crisis on top of a crisis," she said in a speech ahead of next week's meeting, stressing that the world is facing a clear and present danger as a result of high inflation.
The situation, which was already bad from the pandemic, is worsened by the current situation in Europe. High-income countries are experiencing the highest inflation rates in 40 years as worries about oil and gas provisions are on the rise.