The signs of the looming global financial crisis are now becoming more apparent. Debt, social unrest, hyperinflation, unemployment, skyrocketing global inflation, and uncertainty of the future are defining the current scenario of many nations.
For the past few weeks, the world has been witnessing starkly falling stocks, currencies losing value, collapsing crypto market, rising food prices, soaring fuel bills, and the skyrocketing cost of essential commodities. And given the current catastrophes, experts fear that the escalating global inflation is here to stay.
So, what does the skyrocketing inflation looks like globally? Why is inflation rising? How will it affect you?
A Glimpse into the Skyrcoketing Global Inflation
Financial distress and inflation have the power to change the course of history. And with significant economies staring at skyrocketing inflation, the global economy is on a knife edge. Experts fear that the US, the UK, Canada, South Korea, Japan, and the Eurozone could sink into recession within the following year.
According to the latest Ipsos’s What Worries the World Survey, inflation is the most worrying global issue. As per the survey, over 37% of the population in 27 countries around the world cites inflation as the top issue faced by their country today.
The Culprits Behind the Rising Inflation
The war in Ukraine has led to a surge in price increment of various energy-related commodities, clouding the global growth outlook. Moreover, the higher energy prices have further raised production costs, lowered real income, constrained macroeconomic policies, and tightened financial conditions across the globe.
For starters, the growth rate of developed economies is projected to decline to 2.6% in 2022, a stark fall of 5.1% from 2021. Moreover, the ripple effect can also instigate a further plunge to 2.2% in 2023. Thus, further unwinding the monetary and fiscal policy aids issued during the pandemic.
As for the developing economies, the growth rate is speculated to fall from 6.6% in 2021 to 3.4% in 2022. And experts fear the devastation of the Sri Lankan economy and the crumbling Pakistan’s currency are just the starting points of a procession of recession.
Devastating Impacts of the Global Inflation
We try to limit the definition of inflation to a change in purchasing power. While soaring price is definitely the first fall out, inflation changes much more than money in our bank. Here are some of the many ways the current inflation is already transforming the world around us:
Inflation is often cited as the driver of political changes. Now with Europe at war, protests are emerging from the world around, and the protestors can be unforgiving during polling booths.
In the US, for example, food prices are up by 10%, followed by an 8% rise in fuel prices. In the coming November, president Joe Biden will be confronting mid-term elections. And experts fear that the soaring inflation might seal the election, changing the course of American politics.
Currently, global inflation is at 7%. Fifty countries will go to the polls this year and the next, including Brazil, Turkey, Israel, etc. However, with looming inflation, the leaders might be out of office.
Spiking Inflation Sparking Global Unrest
With soaring food prices, rising fuel costs, and wages that are not progressing, people’s wallets are being pillaged by inflation. This has sparked protests and labor strikes all across the world.
Numerous political opponents in Pakistan, nurses in Zimbabwe, indigenous people in Ecuador, unionized workers in Belgium, railroad workers in Britain, hundreds of American pilots, and some European airline employees have all protested this week alone.
Global Food Crisis
According to Economists, as farmers struggle to cultivate and sell crops in one of the world’s major agricultural regions, Russia’s conflict in Ukraine has further escalated inflation by driving up the cost of electricity and the costs of cereals, cooking oils, and fertilizer.
“The one issue that is perhaps underestimated in terms of potential risks to global economic activity is that of food insecurity.”— Gregory Daco, Chief Economist at EY-Parthenon @GregDaco
An array of countries have halted the export of certain food items since the start of the Ukraine war. This resulted in a sudden increase in the prices of these commodities. To ensure food security, governments are now forced to prioritize controlling prices at home.
This increased nationalism in the trade policies is leaving lesser options for the countries with fewer supplies.
Furthermore, inflation threatens to worsen inequality and expand the gap between the billions of people struggling to pay their bills and those who can continue spending while prices rise.
Inflation Reversing the Climate Change Policies
Making climate change a global priority was not easy. It took environmentalists years to convince the world to go green. But unfortunately, inflation is reversing the advancement.
As petrol, diesel, and gas become more expensive, countries are looking for cheaper energy sources like coal, even if that means polluting the earth and accelerating climate change.
With inflation hitting the energy sector, developed nations may shift back to coal. Australia, for example, has already opened coal-fired stations despite climate goals.
What are The Governments Doing to Tackle Inflation?
Central banks throughout the world have raised interest rates in response to growing inflation.
Governments have furthermore reacted by implementing measures to assist the populace in coping with increased expenditures. For instance, the UK government announced a reduction in fuel duty for gasoline and diesel since March. Additionally, the German government has announced a number of initiatives, such as discounted rail fares and a one-time payment to assist offset rising energy prices.
However, inflation continues to be a big issue around the globe, as most surveys demonstrate, despite these efforts.