Developing countries are especially at risk as drought, demand for food items, and the recent war in Ukraine push up crop prices. The prices of wheat, corn, and soybeans rose steeply last year which means higher grocery prices worldwide this year. Consumer food prices tend to lag behind commodity prices by several months. Central banks including the FED have increased the interest rate and they plan on increasing it again because of high inflation. Increasing food prices could add pressure on the interest rate even more. This is more likely to affect poorer countries, where food accounts for up to half of household budgets, and past data has shown that inflation is more closely related to movement in global food prices. This could widen the economic performance between poorer countries and richer ones even more, and this will mean that people in developing countries will see their real incomes decline which will eventually lower the consumption resulting slowdown in their economies.
https://www.wsj.com/articles/high-food-prices-to-pressure-inflation-this-year-11645974001
Food is absolutely an important part of many economies. Although it definitely effects the poorer countries more so, I think it is also important to look at the potential impact on families and individuals. Even in the United States, there are countless families and individuals who are living paycheck-to-paycheck. For those groups, the increased price could be all it takes to reduce the food on their table, thus making them potentially unable to feed themselves and their families regardless of which country they are in.
ReplyDeleteIt is interesting to think about how drastic subtle increases in food prices can be on certain families. Most of us have never had to worry about whether or not we will have food at the end of the day, but some families live their entire lives this way; living paycheck to paycheck means there is no chance of excess funds. These changes in price could mean the end of families. Do you think there should be some policies in which the government subsidizes food for families who were already living in poverty prior to the increase in these foods?
ReplyDeleteI have seen a lot about how the conflict between Russia and Ukraine has effected oil prices, so it is nice to see a change. I think inflation is going to play a huge role in overall prices increasing. The increase in prices could definitely have a significant impact on consumption and spending in poorer countries. It will be interested to see how the Fed will respond to the War in Ukraine and how it will effect them increasing the interest rates.
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