Doha: The year 2022 was a turbulent year for the global economy with runaway inflation and the cost-of-living crisis being dominant issues facing the bulk of the countries globally according to the GCC Inflation Update by Kamco Invest, a regional non-banking financial powerhouse headquartered in Kuwait.
The GCC economies were no exception that faced the challenges of higher prices that worsened due to excessive reliance on imported products, the report noted.
However it also noted that proactive policies adopted by the governments in the region and subsidies on food and energy items had helped to keep inflation in the region at relatively low levels.
Inflation in the GCC averaged at around the four percent mark and showed a downward trend for most countries during 2H-2022, according to the report.
Global energy prices sky-rocketed during 2022 mainly driven by the Russia-Ukraine conflict as Russia’s energy exports were sanctioned.
The EU countries, Russia’s biggest natural gas and oil export destination, started to diversify and look elsewhere for energy imports to curtail Russia’s ability to wage war, the report stated.
The sanctioning of Russia’s energy exports created a supply drop in global energy markets hence pushing oil and natural gas prices up.
The Russia-Ukraine conflict also created a negative sentiment in energy markets as the war nears its one-year anniversary.
In 2022, European natural gas prices reached record highs. The Dutch TTF natural gas future prices touched EUR 340/MWh in August-2022, the highest levels ever recorded, while the US oil prices spiked to 13-year high of over USD 130 per barrel during March-2022, the report stated.
Russia and Ukraine are key producers of global foodstuffs. Between them the two countries export nearly one third of the world’s wheat exports and barley and over 70 percent of its sunflower.
The Russia-Ukraine conflict has prevented export of foodgrains from those countries from leaving their shores causing worldwide price increases in food as well as other repercussions such as fear of food shortages, inflation, and political instability. Inflation reached a peak of 9.1 percent in June-2022 in the US and has mostly trended downwards thereafter.
Inflationary pressure is also expected to ease in the near term. According to the IMF, nearly 84 percent
percent of the countries in the world are forecasted to have lower consumer price index inflation growth in 2023 than in 2022 when inflation reached the highest level in decades.
In terms of global inflation growth, the IMF forecasted in its latest World Economic Report, that global headline inflation would fall from an annual average of 8.8 percent in 2022 to 6.6 percent in 2023 and further to 4.3 percent in 2024.
The IMF attributed its lower inflation projection declining international fuel and nonfuel commodity prices due to weaker global demand.
Efforts to control inflation via tighter monetary policies, including higher interest rates, are expected to continue in 2023.
After raising rate by 25 bps in 2023, the US Fed is expected to undertake further rate hikes as indicated in their statement as well as probability surveys from Bloomberg that shows at least two more rate hikes of 25 bps this year.
