A inflationary acceleration processwhose origin is seen especially in the COVID-19 pandemic and Russia’s invasion of Ukraine, is felt in most Latin American countries, with a particularly significant increase in the cost of food.
foods presented year-on-year increases of 27.1% in Colombia and 24% in Chile in November 2022, practically doubling in both cases the rise in average inflation.
This inflationary process does not leave aside Ecuador, which as of June 2022 registered the highest inflation in seven years, of 4.2% year-on-year. This is a low index compared to other countries, but high if one takes into account that Ecuador has a dollarized economy.
The origins and symptoms of inflation, as well as the prospects for 2023 were presented on December 15 by Juan Pablo Ronderos, founder and partner of the Argentine economic consultancy MAP.
According to the study, the inflationary records of all the economies worldwide are at historical records, reaching annual rates of 7.8% in the United States in October 2022 (maximum of 9% in June 2022) and 10 % in the Euro Zone in November 2022 (peak of 10.6% in the previous month).
The central banks’ response to this trend has been an aggressive increase in interest rates. The US Federal Reserve (FED) is driving the most aggressive rate hike cycle since the 1980swhile in Latin America the reference rate has risen with special force in Argentina, Brazil and Chile, it is indicated.
Inflation and high rates in turn lead to a slowdown in economic activity, combined with a loss of purchasing power of income. Within this framework, many governments have adopted palliative measures, such as increasing subsidies or cutting taxes.
In the case of Ecuador, the Government without the possibility of a monetary policy, due to dollarization, has given special attention to the delivery of aid to the most vulnerable sectors. These were financed with higher oil revenues, which in turn have enabled a fiscal improvement this year (a surplus of 1.2% of GDP is expected, after a deficit of 1.1% in 2021). In any case, The economy is expected to grow 2.5% for 2022 and 2.1% for 2023. An achievement that stands out is precisely that the Ecuadorian economy could be one of the few that ends with primary surplus of 1.2% of GDP.
The issue of price increases was also mentioned a few days ago in a report from the World Bank which noted that in an FAO report, published on November 11, it is estimated that the global food import bill will rise to $1.94 trillion in 2022, an amount that exceeds expectations.
Meanwhile, MAP also gave its prospects for 2023. The consultant considers that the economic panorama of the world and the region will be of a stagflation. It is a phenomenon of high inflation with a stagnant economy. It is that in the perspectives or growth forecasts it is considered that in 2022 the world will grow by 3.2%, but in 2023 the figure will fall to 2.7%. Instead, inflation will remain above these indicators: 9.1% for 2022 and 5.1% for 2023.
As for the Latin American region, it is expected that there will be a growth of 3.5% in 2022 and 0.8% in 2023. But inflation will end in 2022 at 14.6%, while that of 2023 will still remain high at 9.5%. (YO)
Source: Eluniverso
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