Because of the impact of the crisis in Ukraine and the spreading of price pressures, the organization expects inflation to remain high for much longer than originally projected.
“Because of the lagged impact from the crop in 2022, the conflict is expected to have a protracted influence on commodity prices, hurting oil and gas prices more severely in 2022 and food prices far into 2023,” according to the research.
“Inflation is expected to be 5.7 percent in advanced economies and 8.7 percent in emerging market and developing economies in 2022, respectively, up 1.8 and 2.8 percentage points from the January World Economic Outlook.
“Inflation in advanced economies is expected to be 2.5 percent in 2023, while emerging market and developing economies are expected to be 6.5 percent” (0.4 and 1.8 percentage points higher than in the January forecast).
“However, these inflation predictions, like the economic outlook, are surrounded by substantial uncertainty.”
In addition, the IMF stated that energy and food prices contributed considerably to headline inflation in 2021 across all areas, noting that the strong increase in oil and gas prices resulted in an increase in the cost of energy.
In Europe, and to a lesser extent in the United States, these gains were the primary driver of headline inflation.
Rising food prices also played a key influence in most emerging markets and developing countries, as adverse weather hampered crops and rising oil and gas prices drove up fertilizer costs.
“Increased prices for international food commodities have varied effects in different nations, based on the proportion of food in households’ consumption baskets and the sorts of foods eaten.
“Households in low-income nations are particularly vulnerable to price changes in staple cereals, as their diets are generally dominated by a single grain.”
“In low-income nations where wheat, corn, and sorghum are important parts of the diet (particularly in Sub-Saharan Africa), inflation has been almost entirely driven by rising food costs,” according to the paper.