Global inflation exacerbated by Covid-19 and the Ukraine-Russia war
[객원 에디터 4기 / 한동민 기자] Global inflation has recently been on the rise, impacting national economies across the globe. Inflation is defined as a general increase in the prices of goods and services. When inflation is too persistently high, it can hurt the livelihoods of households. On the other hand, when inflation is too low, it can narrow the scope of monetary policy and indicate that an economy is operating below its capacity.
The recent increase in global inflation has been attributed to a myriad of different factors. Among the most prominent is the Covid-19 pandemic, which has induced many governments to loan money to private businesses and consumers to maintain domestic consumption levels as confidence waned. However, such excessive supplies of money—coupled with the onset of cross-border travel restrictions that dramatically raised supply costs—produced severe supply chain disruptions conducive to inflation.
Another important cause of inflation is the Ukraine-Russia war, which discontinued the vast majority of Ukrainian exports of wheat, corn, grains, seeds, oil, and gas that serve as critical food and energy supplies for European economics. The lack of supply dramatically increased demand in these countries, inducing substantial inflation across Europe and beyond.
As a consequence, almost every nation is experiencing tides of inflation, with the IMF indicating that top European economies such as Germany, Italy, and France are undergoing the worst inflation. Slowing down the rate of inflation may prove to be a difficult task. Though most countries have removed travel barriers and largely reopened their markets to international commerce, the structural economic damages caused by Covid continue to pervade labor markets, leaving behind many shut-down businesses and unemployed professionals. The war in Ukraine also poses an indefinite barrier to recovery.
Though the road back to a healthy global economy will be long and difficult, with careful governmental control of national money supplies, countries can gradually rebuild their economies and businesses in the post-Covid era. Until then, countries around the world should make a conscious effort to protect and help their most socioeconomically vulnerable populations in these difficult times.
Sources: The Financial Times, CNBC, The White House
