The outbreak of war in Ukraine has amplified inflationary dynamics already shaken by COVID-19, creating a major supply shock in global commodity markets, says a policy brief from the Policy Center for the New South (PCNS).
In effect, Ukraine and Russia are the world’s main suppliers of basic foodstuffs, minerals and essential energy products, which has generated, after the interruption of the supply of these materials, an economic shock of a significant magnitude, in particularly in commodity markets, where oil, gas and wheat prices have soared.
In its Policy brief dubbed “Review 2022 and outlook 2023: towards an ongoing stabilization”, the PCNS asserts that the outbreak of war in Ukraine has led to a sharp increase in many basic products due to the “weight of Russia, Ukraine or even Belarus”, in the world production.
For Yves Jegourel, author of the report, it is the imposition, or not, of trade and financial sanctions against Russian exporting companies as well as the implementation of retaliatory measures by Moscow which have fundamentally determined the upward or downward trajectory of prices. The researcher explains that given the very sharp rise in prices recorded in 2021 and despite a very gloomy macroeconomic outlook for 2023, these declines should not be interpreted as a sign of stagnation in global commodity markets.
Concerning the surge in energy prices, the author points out that Europe is almost 40% dependent on Russian imports. The western continent had to face a rapid fall due to the stoppage of supplies passing through the Yamal Europe, Brotherhood, NordStream 1 or Turkstream gas pipelines.
Added to this is the impact on industry and manufacturing, intensified by the difficulty in sourcing metallurgical raw materials such as iron and steel, as well as wood, coal and minerals. It turned out that Ukraine was unable to export 70% of its products due to the destruction of its industrial production infrastructure and the blocking of seaports. The war also had repercussions on technological advancement since Ukraine was one of the largest producers of neon.
According to the author, ” with the exception of natural gas, and under the very probable hypothesis of a persistence of the conflict in Ukraine, the world markets should not place the year 2023 under the best auspices“. As for the World Bank, the institution anticipates global economic growth of 1.7% in 2023, 0.5% for advanced economies and 4.3% for developing or emerging ones. The prices of most raw materials should therefore stabilize, or even decrease for the most “substitutable” among them or those most exposed to industrial demand, says the PCNS.
It should also be noted that this inflation has imposed itself in particular in Africa, including Morocco, as an endogenous problem that considerably affects the purchasing power of citizens. Recorded inflation had never reached such a high level since the 1980s. In October 2022, the inflation rate was 8.1%, i.e. a level which represents almost 5 times the moderate level observed since the beginning of the 21st century. However, the Kingdom was able to adopt a set of strategies that were able to contain inflationary pressures. demonstrating the resilience of the national economy.