The rise in energy prices over the past two years is the biggest since the 1973 oil crisis, while the rise in food prices is the biggest since 2008, the World Bank said in its raw materials markets outlook report.
Russia is a major exporter of oil, natural gas and coal, while Ukraine is a major source of wheat and corn. The situation worsened with the increase in fertiliser costs and the spikes in the prices of the main metals.
After nearly doubling last year, energy prices are expected to jump more than 50% this year before falling in 2023 and 2024, the World Bank said. Food prices will rise 22.9% this year, highlighted by a 40% increase in wheat prices, according to the report.
“These developments have begun to raise the specter of stagflation,” warned the World Bank. “Policy makers must seize every opportunity possible to increase national economic growth and avoid actions that harm the global economy.”
Prices are expected to remain at “historically high levels” until the end of 2024, the World Bank said.
The fear is that high prices for essential goods will hit low-income households harder.