admin A new report by the Bank of Singapore states that food security may be the next big crisis alongside the need to secure energy supplies. This comes as the world is just reeling from the effects of a global pandemic. This food crisis increases the risk of social tensions being blown out of proportion, especially among emerging economies. This is due to the fact that protectionism exacerbates inflation.
Agricultural commodity prices have been on a rise since the start of the pandemic mainly because of supply side challenges. Now a new factor has been added to this list: Russia’s war in Ukraine. Bank of Singapore commodities strategist, Sim Moh Siong, in a research note on Monday, said that “food inflation” has the potential to become just as pressing as oil price increases. “This rise in something as basic as food can cause social unrest in low-income countries since food constitute relatively large shares of consumption baskets.”
S&P Global Ratings, in a separate report, have clearly stated that the ripples of Russia’s war in Ukraine are being felt in Middle East and North African economies.
“As per our analysis, we have come to a conclusion that Egypt, Jordan, Lebanon, Morocco and Tunisia will be the ones that will be hit the hardest by economic spillovers from the conflict as their net food and energy imports account for between 4 per cent and 17 per cent of their GDP. A large part of their cereal supply is sourced directly from Russia and Ukraine,” Valerijs Rezvijs, S&P Global economist, reported.
Short-term fiscal measures have been taken to cushion the blow to consumers and producers and largely avoid social discontent. However, this will eventually pile up and put pressure on the post-pandemic fiscal consolidation that will be achieved by many economies in the region.
A prolonged Russia-Ukraine conflict risks aggravating the fiscal dynamics of Mena commodity importers, the economist said.
For two years during the pandemic, prices of agricultural commodities have skyrocketed. The price of fertilizers has steeply risen, since the world’s largest exporter is Russia. Bank of Singapore believes that this is likely going to affect the agricultural yields in the coming seasons.
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