December 10: Globally, people are experiencing inflation at levels not seen for decades as prices surge for essentials like food, heating, transport and accommodation, Reuters said in a news report published on December 8. And though a peak could be in sight, the effects may yet get worse, added the news agency.
How did we get here? In two words: pandemic and war, summed up Reuters.
“A long and comfortable period of scant inflation and low interest rates ended abruptly after COVID-19 struck, as governments and central banks kept locked-down businesses and households afloat with trillions of dollars of support. That lifeline kept workers from joining dole queues, businesses from going broke and house prices from crashing. But it also knocked supply and demand out of kilter as never before.”
By 2021, as lockdowns ended and the global economy grew at its fastest post-recession pace in 80 years, all that stimulus money overwhelmed the world's trading system.
According to Reuters, factories that had been idled could not ratchet up fast enough to meet demand, COVID-safe rules caused labour shortages in retail, transport and healthcare, and the recovery boom caused a spike in energy prices.
If that wasn't enough, Russia invaded Ukraine in February and Western sanctions on the major oil and gas exporter sent fuel prices yet higher.
Known as a "tax on the poor" because it hits those on low incomes the hardest, double-digit inflation has exacerbated inequalities worldwide. While wealthier consumers can rely on savings built up during pandemic lockdowns, others struggle to make ends meet and a growing number rely on food banks.
With winter setting in across the northern hemisphere, that squeeze on living costs will tighten as fuel bills soar. Workers have taken strike action in sectors from healthcare to aviation to demand that wages keep pace with inflation. In most cases, they are having to settle for less, added Reuters.
Cost of living concerns dominate the politics of rich nations – in some cases relegating other priorities, such as climate change action.
But if things are tough in industrialised economies, rocketing food prices are worsening poverty and suffering in poorer countries, from Haiti to Sudan and Lebanon to Sri Lanka.
The World Food Programme estimates an extra 70 million people worldwide have been driven closer to starvation since the start of the Ukraine war in what it calls a "tsunami of hunger".
According to the news agency, the world's central banks have embarked on steep interest rate hikes to cool demand and tame inflation. By the end of 2023, the International Monetary Fund expects global inflation to have fallen to 4.7% - just less than half its current level.
In the context of Nepal, the trouble seems much more as the central bank says the year-on-year inflation hit as high as 8.5 percent in the first quarter of the current fiscal year compared to 4.24 percent a year ago.
The IMF's regular October outlook was one of the bleakest for years, stating: "In short, the worst is yet to come and for many people, 2023 will feel like a recession."
According to AFP, IMF chief Kristalina Georgieva has warned that the chance of global growth dropping below two percent is increasing as major economies slowdown. Such a trend was last seen during the coronavirus outbreak and the global financial crisis of 2009, AFP added.
Similarly, the World Trade Organization (WTO) has also warned that several major economies face a real risk of sliding into recession as the war in Ukraine, rising food and fuel costs, and soaring inflation cloud the global outlook.
The Geneva-based trade body last month projected global trade to rise just 1.0 percent in 2023, down sharply from an estimated 3.5 percent rise for this year.