The World Bank said in a recent report that many countries are likely to face recession this year, as the world is entering “a protracted period of feeble growth and elevated inflation.” In January, the lender predicted global growth of 4.1 percent. In June, it cut global growth forecasts by 1.2 percentage points to 2.9 percent for 2022. The bank blames the Covid-19 pandemic for most of the problem, and said the Russian invasion of Ukraine is also a factor.
“The danger of stagflation is considerable today,” World Bank President David Malpass said. “Subdued growth will likely persist throughout the decade because of weak investment in most of the world. With inflation now running at multi-decade highs in many countries and supply expected to grow slowly, there is a risk that inflation will remain higher for longer.”
From the Associated Press: “A staggering 71 million more people around the world are experiencing poverty as a result of soaring food and energy prices that climbed in the weeks following Russia’s invasion of Ukraine, the United Nations Development Programme said in a report Thursday. The UNDP estimates that 51.6 million more people fell into poverty in the first three months after the war, living off $1.90 a day or less. This pushed the total number globally at this threshold to 9 percent of the world’s population.”
The AP report said an additional 20 million people slipped to the poverty line of $3.20 a day. In low-income countries, families spend 42 percent of their household incomes on food but as Western nations moved to sanction Russia, the price of fuel and staple food items like wheat, sugar and cooking oil soared. Ukraine’s blocked ports and its inability to export grains to low-income countries further drove up prices, pushing tens of millions quickly into poverty.
“The cost of living impact is almost without precedent in a generation… and that is why it is so serious,” UNDP Administrator Achim Steiner said at the launch of the report. The speed at which this many people experienced poverty outpaced the economic pain felt at the peak of the pandemic. The UNDP noted that 125 million people experienced poverty over about 18 months during the pandemic’s lockdowns and closures, compared with more than 71 million in just three months after Russia’s invasion of Ukraine in late February.
Last week, the Philippine Statistics Authority said inflation surged to 6.1 percent in June, the highest since October 2018 when inflation averaged 6.9 percent. The PSA attributed this to rising food and fuel prices. National Statistician Claire Dennis S. Mapa said given the steep increase in commodity prices, high inflation would likely continue in the coming months. “We think we have not reached the peak. Based on information on the ground from our data collectors, we collect data weekly, prices of products continue to increase,” Mapa told reporters in a briefing (Read, “June inflation at 6.1% as food prices surge,” in the BusinessMirror, July 6, 2022).
Despite government predictions that we will have an average of 5 percent inflation rate in 2022, nobody is certain how high it will go. As the PSA has said, we have not reached the peak yet. As the World Bank chief said, “there is a risk that inflation will remain higher for longer.”
The Marcos administration earlier said it prefers targeted support programs over wide-scale subsidies and excise tax suspensions to help ease the pain of rising prices. It would do well for the government to act fast to ease inflation pain, as runaway prices could push more households into poverty.