High levels of inflation have affected the economies of countries over the past two years and this situation has imposed on consumers higher costs and more difficult financial choices.
Why is the inflation rate so high now? How does it affect people's livelihood? And work? What do prospects look like in the future?
What are the causes of high inflation?
A report in the American Forbes magazine says that monthly inflation data in the United States peaked at an annual rate of 9.1% in June 2022, before it has declined relatively since then.
The Forbes report quotes experts who believe that the high inflation we are witnessing today may have occurred due to a combination of factors, including:
The strong post-pandemic recovery
Supply chains continue to be affected
The war in Ukraine and its effects on energy and food prices
raise interest rates
wage increases after years of low growth
Inflation in America - the world's largest economy - has returned to acceleration, as the consumer price index rose 0.5% last January after rising 0.1% last December, as a result of an increase in gasoline prices by 3.6%.
According to the US Department of Labor, the consumer price index increased in the 12 months to January by 6.4%, according to Reuters.
When does inflation happen?
The Forbes report says that inflation occurs when changes in the economy cause prices to rise on a large scale, which reduces the purchasing power of consumers, and adds that the main reason for the increase in prices is the disparity between supply and demand.
She believes that there are 3 main reasons why demand may exceed supply:
Supply disruptions, as happened during the COVID-19 pandemic
Increase the money supply
consumer expectations
What is the difference between inflation and cost of living?
Report author Corian Hicks explains that inflation describes the gradual increase in prices, while the cost of living represents how much a person needs to spend in a given period of time.
And it quotes experts that when inflation rises, so do the costs of goods and services, which leads to the erosion of purchasing power, and this is a matter of concern, especially for those with low fixed incomes.
What are the effects of inflation?
Inflation can affect the price of everything you need for daily living, from food to housing to the cost of filling your gas tank so you can go to work or buy clothes.
According to author Corian Hicks, inflation has an impact on the real estate market as much as it affects the cost of living, in terms of rising material and labor costs along with higher interest rates.
A World Bank report says that high inflation rates pose a major challenge to many families around the world, as high prices can erode the value of wages and real savings, making families poorer.
He adds that the feeling of these effects varies from one group to another, as low- and middle-income families are more vulnerable to the risks of high inflation rates than the richer families, and this matter reflects the composition of their income, their possessions, and the types of their basket of consumer goods.
The report confirms that high inflation rates exacerbate inequality or poverty, noting that even families that have managed to escape poverty recently may find themselves falling back into its clutches because of these increases.
consumption basket composition
The World Bank report says that the calculation of consumer price inflation measures is done by using a basket of goods that represents the average person's consumption, but the actual composition of spending varies greatly according to income groups.
The report adds that the lowest-income families in emerging market countries and developing economies spend - for example - about 50% of their income to obtain food, while the highest-income families do not spend more than 20% of their income on food.
The report confirms that in times of economic crisis, high-income families can easily switch from higher-quality goods to lower-quality goods, and can benefit more from discounts on wholesale purchases and sales, while poor families do not have these options.
what to do
The Forbes report says that no one can predict exactly how high inflation rates will be or when they will end.
He quotes experts as saying that inflation has peaked in most markets and is supposed to continue in a downward trend, but he believes that removing the pressures that led to higher prices in the first place - such as historically low unemployment and higher wage growth - will take much longer.
But the report believes that one thing most experts agree on is that advance planning is crucial to countering inflationary pressures, adding that having an emergency fund can give you protection from these pressures to keep your long-term savings fully invested.
As for policy makers in countries, the World Bank report says that they must:
Using social welfare policies to protect the poorest from price hikes.
Refrain from resorting to trade restrictions and export bans to protect local food supply operations.
That central banks take into account the potential effects of their actions - to confront inflation - on poverty and inequality rates.
Stimulating more competition in the financial sector of countries as one of the measures to protect the real value of the property of poor families from inflation.
What countries have the highest inflation in food prices?
According to the latest data published by the World Bank website, the ranking of the 10 countries with the highest inflation in food prices is as follows:
Zimbabwe: 285%
Venezuela: 158%
Lebanon: 143%
Argentina: 95%
Turkey: 77%
Ghana: 60
Sri Lanka: 59%
Rwanda 59%
Suriname: 55%
Haiti: 53%
What Arab countries have the highest inflation in food prices?
According to World Bank data and other official data, the five countries with the highest inflation in food prices in the Arab region - with the exception of Sudan, Yemen, Syria and Comoros, where no figures are available - are as follows:
Lebanon: 143%
Egypt: 48.1%, according to the latest government data
Morocco: 16.8%, according to the latest government data
Mauritania: 15.4%
Tunisia 14.1%, according to the latest data.
What are the food price inflation rates by economies?
World Bank data indicates that domestic food price inflation remains high around the world.
Information for the period between last September and January shows high inflation rates in almost all low- and middle-income countries, as it recorded 83.3% of low-income countries, 92.9% of lower-middle-income countries, and 89% of middle-income countries. In the upper-middle-income countries, inflation levels exceeded 5%, while many of them suffer from double-digit inflation.
According to the World Bank, the proportion of high-income countries that witnessed an increase in food price inflation rose to 85.7 percent.
The most affected countries are located in: Africa, North America, Latin America, South Asia, Europe and Central Asia.
future prospects
International Monetary Fund forecasts indicate a decrease in global inflation from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024, but these two rates remain higher than pre-COVID-19 levels (from 2017-2019) by about 3.5%.
The report says that the priority in most economies - amid the cost of living crisis - is to reach a sustainable decline in the inflation rate, noting that global headline inflation may have peaked in the third quarter of last year, unlike core (core) inflation that has not yet reached its peak. in most economies.
At a time when the Fund did not rule out the possibility of inflation falling faster than policymakers imagined, it warned that premature “monetary easing” (cutting interest rates) could cause a return of sharp inflation once activity recovers, leaving countries vulnerable to more shocks. He stressed the need for policy makers to focus on returning inflation to its target level without delay.