Will the year 2023 witness a decline in global inflation rates?

The year 2022 was not a happy year for the majority of the world's economies, both developed and developing ones. Everyone suffered from the inflation rates that the global economy has been going through for decades, especially the developed countries.

Including: America and the European Union, where inflation rates approached 10% during the months of 2022.

This is what made the International Monetary Fund issue a pessimistic vision regarding inflation rates in the global economy. In its periodic report entitled “October 2022 World Economic Outlook,” the report stated that inflation rates in 2021 amounted to 4.7%, and it is expected to rise to 8.8% in 2022, i.e. Inflation has doubled in two years, and on expectations for 2023, the report estimates that it will be around 6.5%, and that it will decline to what it was in 2024 to reach 4.1%.

The bitter harvest of the Russian war on Ukraine

In its fastest negative indicators for the global economy, the Russian war on Ukraine led to a rise in oil prices in the international market to exceed $120 a barrel, then began to decline after June 2022, but it is still shrouded in mystery, despite reaching a ceiling of $80 a barrel. .

The energy crisis was accompanied by a rise in food prices in the international market.

Because of the Russian war on Ukraine, due to the fact that the two countries are exporters of oil and food, and the delay in the movement of ships from the two countries caused a real crisis that affected many developing and less developed countries.

Therefore, the general budgets of many countries witnessed confusion, in attempts to adapt to the developments of inflation, which affected all activities and economic sectors.

Here, the importance of countries’ economies having a balance of developmental self-reliance emerged, and the existence of an alternative plan to provide high proportions of commodities, which are relied upon through import.

Developing countries pay the price

In light of the high global inflation rates, developing countries have endured an additional wave within the framework of what is known as imported inflation, due to the dependence of developing and least developed countries on importing many basic commodities from abroad. Therefore, most Arab countries suffered from high inflation rates during 2022, and a decrease may be Oil prices in the international market have recently contributed to reducing inflation rates during 2023.

Especially since the drop in the price of oil is accompanied by a tangible breakthrough in the exit of food and oil commodities from Ukraine and Russia, according to the Istanbul Agreement, according to which Turkey, Russia and Ukraine, under the auspices of the United Nations, secured the exit of ships loaded with oil and food to all countries of the world. Russia even demanded that the agreement include other commodities.

Among the salient features of 2022 is the monetary policy pursued by America of raising the interest rate to be around 4.5%, which led to an increase in the value of the dollar against all currencies of other countries, which brought about high inflation due to the devaluation of local currencies in many developing countries, This is what happened in many countries in the region.

Such as: Egypt, Tunisia, Syria and Lebanon.

Social protection

With the rising wave of inflation in all the different economies, citizens in developed countries, such as: America and the European Union, enjoyed social protection, which mitigated to some extent the negative repercussions of the crisis, such as: putting a ceiling on rising energy prices, or imposing taxes on major energy companies, to reduce the burden on rest of the segments of society.

However, in developing countries, including the Arab countries, this cover of social protection was not available, and the citizens of those countries faced the wave of inflation within the framework of their individual capabilities, and the governments did not find anything but to cling to the burden of international crises.

We must understand the effects of the inflation wave on the political situation in America, despite the government's efforts there to mitigate the effects of the inflation wave, so the American citizen punished the Democratic government led by Biden, by losing the majority in the House of Representatives.

As for the citizens of developing countries, the policy tools did not enable them to do anything towards their governments, and there are demands in many developing countries for governments to move to reduce prices, after the oil prices in the international market have calmed down to some extent, as well as food prices.

The future of inflation

As mentioned above, according to estimates by the International Monetary Fund, the inflation rate will be at 6.5% in 2023, a decrease of about 2.3%, but this is conditional on continuing efforts to lower the price of energy and food.

Any shock or change related to an escalation in the Russian war on Ukraine, or a breach of the Istanbul Agreement for the export of oil and food from Russia and Ukraine, will bring us back to a high inflationary wave, which means that the prospects for low inflation rates in the next two years 2023 and 2024 will be fragile, and linked to the political atmosphere. Significantly.

As for the most optimistic possibility, it is that an agreement will be reached to end the Russian war on Ukraine through political means, which would return oil prices to the level they were in June 2021 at about $65-70 per barrel, a price that enables many activities. Economical price reduction in international markets.

It is remarkable that the European Union represented a case of success in coordinating its efforts to confront the inflation crisis, from its attempts to regulate gas imports, or to rationalize energy use, regardless of the impact of these tools on calming the wave of inflation, but it is a serious and respected attempt.

As for the case of failure, it was in the Arab world and the Middle East. There were no tangible or announced coordination efforts to confront inflation in particular, and the global economic crisis in general, which called for comparison.