World Bank warns of sharp rise in prices until 2024 after Ukraine conflict

The war in Ukraine is causing an "unprecedented" wave of inflation that will result in harsh global measures to mitigate its effects

AFP/ERIC BARADAT  -   World Bank Group Headquarters in Washington, DC

The World Bank has just announced that all economies will face a series of problems related to rising prices. The entity assures that, due to the Ukrainian conflict, the price of food and energy will experience a continuous growth that will extend until 2024. This means that, over the next three years, and as a continuation of the war or sanctions against Russia, there will be an "unprecedented" wave of inflation, as the institution has indicated.

"If the war in Ukraine drags on or additional sanctions are imposed on Russia, prices could continue to rise and become more volatile than currently expected," the bank said.

AFP/ERIC BARADAT - Washington headquarters of the World Bank Group

The organisation's latest reports have revealed that global commodity price shocks are expected. This will lead to the risk of inflationary stagnation in some economies, which may have very negative consequences for countries that cannot afford to pay the high prices of some resources.

Since the beginning of this event, governments have been looking for a number of urgent alternatives to make the impact as small as possible. But the war only aggravates the situation, as many commodities come directly from Russia and Ukraine. These two countries are the world's largest exporters of many resources, which means that, when looking elsewhere for solutions, there is a clear shortage of commodities. Consequently, prices end up rising considerably, causing a cost war.

However, this situation has led to a comprehensive analysis that is not very favourable for the international economy. The World Bank points out that war is the worst economic factor in the world, in terms of commodity price increases, since the 1970s.

During this decade, and specifically in 1973, the Gulf States decided to cut off energy supplies to Western countries. This was a severe response to the support of some world nations and organisations for Israel in the October War (also known as the Ramadan or Yom Kippur War). Here, several Arab countries attacked the Hebrew country during the celebration of one of the most important Jewish religious holidays in order to regain the territories taken by Israel.

REUTERS/Murad Sezer - Currency exchange office in Istanbul, Turkey

It is also noted that not since 2008, when one of the worst crises hit all economies, has there been such an exaggeration in the prices of some products. Similarly, restrictions on trade in food, fuels and agricultural fertilisers are also being introduced, which are having a serious impact on inflationary pressures.

Russia and Ukraine are among the world's largest exporters of several resources. On the one hand, Russia is the world's largest exporter of natural gas and fertiliser, and the second largest exporter of crude oil. On the other hand, together with Ukraine, its wheat production accounts for about a third of global wheat exports, 19% of maize and 80% of the world's sunflower oil.

The World Bank forecasts that, following the disruption of these goods, energy prices will rise by more than 50% this year, although they are expected to start to fall during 2023 and 2024. Meanwhile, agricultural and mineral commodities are expected to rise by 20 per cent before starting to fall around that time. It will all depend on how long the conflict drags on and how much of an international blockade is carried out against Russia.

Right now, the latest developments are causing central banks and governments to struggle to find alternatives. They are trying to convince consumers by reducing some prices. These would stimulate markets and direct investment, which would also promise to create new jobs, only if the inflation rate remains low.