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Global problem of rising food prices - causes and solutions - ANALYSIS

18 January 2022 11:12 (UTC+04:00)
Global problem of rising food prices - causes and solutions - ANALYSIS

By Trend

The external factors of inflation greatly intensified in 2021. The disruptions in the trade supply chain, weak recovery in employment, and rising transport and logistics costs have hampered the expansion of global supply during this period.

These processes have led to global inflation and a mismatch between world supply and demand. According to the World Bank, energy prices increased by 77 percent year on year, while non-energy prices - by 20 percent in 2021.

The Food and Agriculture Organization of the United Nations (FAO) stressed that world food prices in 2021 increased by 23.1 percent year on year.

During this period, the cost of international transportation of 1 container increased by about 60 percent (the annual increase was up to four times during some months).

The share of food products in the formation of the inflation rate was high. In December 2021, food inflation was 2.6 percent per month, 15.8 percent per year, and 8.1 percent on average.

About 3/5 of general inflation accounts for food inflation. Thus, the contribution of food prices to annual inflation amounted to 6.9 percent.

The inflationary pressure intensified in most countries, as well as among major trading partners, which means an acceleration of inflationary import for the Azerbaijani national economy in 2021.

The annual inflation rate exceeded the target by 3.4 times in the US, 2.5 times in the Eurozone, 2.1 times in Russia, 1.5 times in Kazakhstan, 2.1 times in Belarus, 2.1 times in Ukraine, 4.2 times in Georgia, and 4.3 times in Turkey in November 2021.

“Azerbaijan proposes to ensure a full cycle of production of these goods on its territory,” Ilgar Valizade, head of the South Caucasus Political Scientists' Club, told Trend.

“If the issue is the consumer goods and high added value, then, of course, there is an interest in cooperation with other countries,” Valizade said.

The head of the South Caucasus Political Scientists' Club said that in particular, it would be very interesting and attractive to implement the idea of producing a group of category A goods for the population together with the Turkish colleagues.

“The Turkish industrial sector is being actively developed and we also have joint production experience in a number of spheres and this can be used for consumer goods,” Valizade added.

The head of the South Caucasus Political Scientists' Club said that moreover, there is an interesting proposal, first of all, these are investment packages from other countries for the joint establishment of cooperation and the production of certain types of products in Azerbaijan.

Valizade stressed that industrial cooperation can be effectively implemented proceeding from the specifics of the agreements signed between Azerbaijan and Turkey, and Ukraine.

“Joint cooperation with a number of manufacturers from other countries is possible,” the head of the South Caucasus Political Scientists' Club said. “Russian companies also have a good potential for developing cooperation with our country in this sphere. Azerbaijan and Russia already have experience in assembling cars and producing pharmaceutical products in our country.”

“Our country also has a joint venture with Belarus for the assembly of agricultural machinery and equipment,” Valizade said. “I think that this way may be the best way to reduce the risks from the current situation.”

The head of the South Caucasus Political Scientists' Club said that first of all, cooperation is required when it is possible to do everything through internal capabilities while when support is required, it is possible to do it together with neighboring countries.

“This will give an impetus to the interaction between Azerbaijan and those countries with which it actively interacts and will be able to solve this problem,” Valizade said.

Expert in the field of economy Khalid Karimli thinks that the world prices for food and non-food products will rise.

“The main reason is the restrictions imposed during the COVID-19 pandemic,” the expert said. “The global lockdown has created the problems along the value chain in the economy. Maritime transportation, which accounts for 80 percent of the world trade, has grown five-fold.”

In particular, Karimli stressed that inflation in the world due to import is the reason for the increase in prices in Azerbaijan. Therefore, the rise in prices in Azerbaijan is inevitable.

“The world prices may stop increasing in the second half of 2022,” the expert said. “The current price increase will continue in the first half of the year. It will stop in the second half of the year.”

The expert said that almost all countries have faced the problem of rising food prices and Azerbaijan is not an exception.

“First of all, it is worth stressing the rise in prices for essential and consumer products,” Karimli said. “Azerbaijan, like a number of other countries, imports these products.”

“The increase in prices, in this case, is connected with transportation,” the expert added. “The prices for the transportation of goods have also increased in connection with the disruption of the supply chain. The prices for maritime transportation have increased, which greatly affects the rising prices for a number of essential and consumer goods.”

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