Why the world economy is recovering, but everything around is becoming more expensive

The global economy has begun to recover from the coronavirus pandemic. This process is spurred on by the COVID-19 vaccine . However, vaccination did not save global GDP from the imbalances caused by the lockdown.

The recovery from the worst crisis in a century has been uneven across countries. This is causing companies around the world to panic and hysterically replenish their stocks.

“The sharp increase in demand and the resulting shortages are pushing prices to peak values ​​for literally everything from food to semiconductors and metals. The prospects for a return to the usual economic course are not yet visible,” the newspaper writes.

The global crisis has led to the fact that the world economy has lost more than $ 3.5 trillion. This is twice as much as from the 2008 crisis.

A year after the WHO announced the epidemic, after the appearance of vaccines, the situation began to gradually recover. But this is uneven.

The main risk for the markets was uncontrolled inflation: against the backdrop of a shortage, prices rose for literally everything. These are metals and foodstuffs. While countries have begun to lift lockdowns and resume production, demand for cars, household goods and some products has already risen in price. "To stay ahead of even bigger price increases, manufacturers are replenishing stocks. Copper, iron ore and steel, corn, coffee, wheat and soybeans, lumber, semiconductors, plastic and cardboard for packaging - are facing catastrophic shortages that will not be able to fill for a long time to come" , - writes the publication. When this rise in prices will end, no one dares to say yet.

Recent events - a traffic jam in the Suez Canal, a massive outbreak of COVID-19 in India and a cyber attack on the Colonial Pipeline in the United States - are exacerbating the situation. The first situation led to the fact that it became more expensive to carry goods around the world. The second will also affect the prices of tea and other Indian goods.

Here, in addition to covid, several other factors have become the reason for the rise in prices. Among them is the weather.

"Food and Agriculture Organization of the United Nations (FAO) calculated that food prices have reached a maximum since 2014. Experts explained this by a sharp increase in the prices of sugar, butter, meat, dairy products and cereals," the newspaper writes.

Another factor is clean energy. The development of programs to combat climate change by many energy companies has led to the fact that they began to increase the volume of fuel obtained from the processing of vegetable and animal fats. The demand for renewable energy is only growing from year to year, and, consequently, products can become even more expensive.

Labor shortage also pushes food prices up. In particular, because of this, palm oil prices jumped by 120% over the year and reached record levels. "The main suppliers of palm oil are Malaysia and Indonesia, they account for approximately 84 percent of the global market. The coronavirus pandemic has caused a shortage of workers in these countries and led to a reduction in production," the publication explains. At the same time, the main importers - the United States and China - on the contrary, are increasing their consumption.

Raising the price of raw materials will inevitably affect the prices of all products where it is used - from chocolate to lipstick.

The rise in prices was also affected by increased demand. The recovery of world GDP led to an increase in prices in the metal market. This trend is predicted to continue in the future as demand exceeds supply. Experts considered that the price of the metal will still grow as green energy is introduced and against the backdrop of a reduction in supplies.

The uneven economic recovery has led to an uncontrolled rise in inflation around the world. “Since the early 1990s, the global economy has experienced a comparable jump in food prices only three times. The last time this happened was in 2010-2011, and was accompanied by a series of uprisings and protests in the Middle East, dubbed the “Arab Spring”. The rapid acceleration of inflation in food markets nutrition promises the world a wave of social upheaval, especially in weak economies.

In the US, there is the greatest risk of inflation, the reason is the rapid recovery. “In order to curb inflation, the regulator may raise the base rate, but this prospect scares investors: this will make loans more expensive and limit opportunities for companies to grow and develop. So far, the Fed has kept the rate at 0.25 percent per annum. This is good for the stock market, as low rates support demand for shares and other assets. However, further inflation may change the plans of the regulator," the author of the article explains.

As for Russia, the Central Bank of the Russian Federation has already started tightening its credit policy and raised the key rate by 0.5 percentage points to 5%. "The rapid recovery in demand and increased inflationary pressure create the need for an earlier return to a neutral monetary policy. The Bank of Russia will assess the feasibility of further raising the key rate at the next meetings," the regulator commented. And the head of the Bank of Russia, Elvira Nabiullina, hinted at a future fight against rising prices.

The economist said that the price will rise in the summer

“Until the global economy is ready to return to normal, vaccination has not solved all the problems caused by the pandemic, which means that turbulence remains. Inflation will be the main headache for central banks around the world. Regulators will have to maneuver between economic stimulus and rising prices, but for how long this balance will have to be maintained - it is impossible to predict yet," the publication summed up.