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A year of war leaves pain and resilience in the global economy

A year of war leaves pain and resilience in the global economy

An Egyptian widow has trouble affording meat and eggs for her five children. The owner of a laundromat Germany He sees exasperated how his electricity bill is multiplied by five. Some Nigerian bakeries close, unable to bear the exorbitant price of flour.

One year after Russia invaded Ukraine on February 24, 2022 and caused widespread suffering, the global economy is still reeling from the consequences: reduced supplies of grain, fertilizer and energy are combined with more inflation and economic uncertainty in a world already dealing with too much of both.

Despite the horror of the war, there is a consolation: it could have been worse. Companies and countries in the developed world have turned out to be unexpectedly resilient and have so far avoided the worst case scenario, a severe recession.

But in emerging economies, the impact has been more painful.

In Egypt, where almost a third of the population lives in poverty, Halima Rabie has struggled for years to feed her five school-age children. Now the 47-year-old widow has cut back on even the most basic foods, and prices continue to rise.

“It has become unbearable”Rabie said on her way to her job as a cleaner at a state hospital in Giza, Cairo’s twin city. “Meat and eggs have become a luxury.”

In USA and other wealthy countries, the painful rise in consumer prices fueled in part by the effect of the war on the price of crude oil has subsided steadily. That has fueled hopes that the US Federal Reserve will scale back its war on inflation with interest rate hikes that have threatened to plunge the world’s largest economy into recession and plunge other currencies against the dollar.

China also abandoned the draconian lockdowns of its strategy late last year. “zero COVID”which had slowed the growth of the world’s second-largest economy.

There has also been some luck: A cooler-than-usual winter has helped drive down natural gas prices and limit the damage from an energy crisis sparked after Russia all but cut off gas to Europe. Even so, oil and gas prices remained high enough to mitigate the impact on the Russian economy, highly dependent on energy exports, from international sanctions imposed after the invasion ordered by President Vladimir Putin.

War “It’s a human catastrophe.” said Adam posen, president of the Peterson Institute for International Economics. “But its impact on the world economy is a passing blow.”

Still, in ways big and small, war hurts. In Europe, for example, natural gas prices are still triple what they were before Russia began amassing troops on the Ukrainian border.

Sven Paar, who runs a laundry in Walduern in southwestern Germany, has spent about 165,000 euros ($176,000) for gas this year, compared with 30,000 euros ($32,000) last year, to keep 12 running. industrial machines that can wash up to 8 tons of fabric per day.

“We have transferred the prices, one by one, to our customers”Paara said.

For now, he has been able to keep his clients after showing them the electricity bills that accompany the price increase.

“Let’s cross our fingers, for now it works”, said. “TOAt the same time, customers protest, and they have to pass the costs on to their own customers.”

Although he has kept his regular clients, he works less. Restaurants with fewer customers need to wash fewer tablecloths. Several hotels closed in February instead of paying heating costs during their low season, leaving fewer sheets to wash.

Excessive food prices hit the poor especially hard. The war has disrupted deliveries of wheat, barley and cooking oil from Ukraine and Russia, which were big suppliers to Africa, the Middle East and parts of Asia where many people are food insecure. Russia was also the main supplier of fertilizer.

Although a United Nations-brokered deal has allowed some food shipments to leave the Black Sea region, the pact is due to be renewed next month.

In Egypt, the world’s biggest importer of wheat, Rabie got a second job at a private clinic in July, but continues to struggle to keep up with rising prices. He earns less than $170 a month.

Rabie said she cooks meat once a month and has turned to cheaper processed products to ensure her children get protein. But even those get harder to come by.

The government has urged Egyptians to try chicken feet and wings as an alternative source of protein, a proposal met with derision on social media but also boosted demand for those products.

“Even the legs have become expensive”Raby said.

In Nigeria, a major importer of Russian wheat, average food prices soared 37% last year. Prices have doubled in some places due to wheat shortages.

“People have to make huge decisions,” said Alexander Verhes, who runs Life Flour Mill Limited in the southern state of Delta. “What food do they buy? Do they spend on food? schools? Medication?”.

At least 40% of bakeries in the Nigerian capital Abuja have closed after the price of flour rose by around 200%.

“Those who are still in business do it to the limit without benefits”said Mansur Umar, president of the bakers’ association. “Many people have stopped eating bread. They have looked for alternatives because of the cost”.

In Spain, the government will invest 300 million euros ($320 million) to help farmers buy fertilizer, which is worth twice as much as before the war in Ukraine.

“Fertilizer is vital, because the earth needs food too”, said José Sánchez, a farmer in the town of Anchuelo, east of Madrid. “If the earth does not have food, the planting does not pull up.”

All of this slows down the global economy. He International Monetary Fund cut its global growth expectations for this year and 2022 by the equivalent of $1 trillion in lost production. The European economy, for example, “still experiencing significant difficulties” despite a decline in energy prices and is in danger of falling into a recession, said Nathan Sheets, chief global economist at banking giant Citi.

Consumer prices rose 7.3% in the world’s richest countries last year, according to the IMF, above the 3.9% the agency had forecast in January 2022, and 9.9% in the poorest, compared with 5.9% estimated before the invasion.

In the United States, that inflation has forced businesses to be flexible.

Stacy Elmore, co-founder of The Luxury Pergola in Noblesville, Indiana, said the cost of providing eight workers with health insurance has risen 39% in the past year, to $10,000 a month. In a context of a lack of workers, it has also had to increase the hourly wage of its main installer, from $30 to $34 an hour.

Inflation-stricken consumers began to take issue with the $22,500 price tag for a 10-by-16-foot (3-by-4.8-meter) pergola that was being sold through retailers. Sales tanked last year. So Elmore opted for models to assemble at home and sell directly to customers at a much lower price of $12,580.

“With so much inflation, we have worked to broaden the appeal of our products and make it easier for the average person to buy them.” Elmore said.

In the Indonesian capital, Jakarta, many street vendors know they can’t pass on large increases in food prices to already cash-strapped customers. So some reduce portion sizes, a practice known as “redoubling”.

“A kilo of rice was for eight portions (…) but we make 10 portions”said Mukorni, 52, who runs a food establishment and like many Indonesians only uses one name. The customers, he said, “they will not come to the store” if the prices are too high.

“We dream of peace”said, “because after all, no one will win or lose, because everyone will be a victim.”

Source: AP

Source: Gestion

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