Global GDP shrank by a staggering 3.5% in 2020, according to the International Monetary Fund, more than double the 1.7% shrinkage in 2009. There was a sharp recovery of 6.1% of world GDP in 2021 – as demand after the lockdown was launched. However, ongoing supply chain issues, including Covid-related staff shortages and a lack of vital data, have caused prices to rise. In January 2022, the month before the conflict broke out in Ukraine, inflation in both the United Kingdom and the United States was already at a high of 30 years. This war has, of course, pushed fuel and food prices even further, seriously exacerbating the cost-of-living crisis, especially in the energy-intensive western nations. Oil prices reached $ 138 (9 109) a barrel in mid-March, 95% higher than the 2021 average – and remain well above $ 100, 30% higher than in December 2021. And with Russia and Ukraine typically supplying about 30 percent of all wheat and maize exports – as well as huge amounts of fertilizers – world food prices soared by 13% in March alone, according to the Food and Agriculture Organization of the United Nations. having already increased last year. Worldwide, average food prices, according to the FAO, are now almost 40% higher than at the beginning of 2021. Central bankers – who have long ignored inflation amid concerns about the impact of interest rate hikes on fragile stock / bond markets – are now playing to bridge the gap in a bid to restore the credibility that plagues their own of risks. As a result, the western world is at an economic and political turning point similar to that of the 1970s – with inflation soaring in double digits and real wages falling sharply, increasing the very real risk of serious industrial action. Last week, Russia – which still supplies about 40 percent of Western Europe’s gas – cut off supplies to both Poland and Bulgaria. Soviet satellites in the USSR era, both nations are now, of course, in the European Union. Moscow claims it has cut off supplies to Poland and Bulgaria – which receive about 45% and 85% of their gas from Russia respectively – for refusing to pay in rubles. This is an attempt by Russia to back up its currency – and to circumvent Western sanctions that now exclude Russia from the US-dominated Swift banking network. This limits Moscow’s ability to use any dollars and euros it receives in exchange for its exports for payments abroad. At present, supplies to major EU economies dependent on Russian gas – such as Germany and Italy – continue. But we have just seen a major escalation, as Moscow rejects Western sanctions – sanctions that the West may now choose to tighten even further.
