Double-digit food price inflation to weigh on Mena’s overall growth

Rising food prices are making it difficult for many families in the Middle East and North Africa (Mena) region to put meals on the table.Double-digit food price inflation hits the poor much harder than the rich in the Mena region, although a recent World Bank research suggests that this is likely occurring as well in other emerging and developing economies.This is largely due to the disproportionate share of family budgets the poor devote to food and energy.Average year-on-year food inflation between March and December 2022 was 29% in the Mena region, which is far larger than (19.4%) headline inflation.These outsized increases in food prices, even if temporary, can have long lasting effects. The increase in food prices associated with the Russian invasion of Ukraine may have increased the risk of stunting by 17-24% in the developing Mena region, which translates into about 200,000-285,000 stunted newborns.Substantial peer-reviewed research has shown that child malnutrition can lead not only to poor performance in schooling, but also to lower incomes and poorer health outcomes well into adulthood.Furthermore, the effects are intergenerational — the children of adults who were stunted at birth may be affected too. The key link between food price inflation and its long run effects is early childhood, and the state of child health and nutrition in the region was already an area of public-policy concern before the current food crisis.Indeed, the prevalence of food insecurity in the region has been steadily on the rise from about 11.8% in 2006 to 17.6% in 2023. Thus, this report links the short-run challenges posed by the evolving global environment for the region’s macroeconomic outlook, particularly economic growth and inflation, to long-term development challenges that will need to be addressed well after the shocks emanating from the war in Ukraine have receded.Double-digit food price inflation will weigh on the Middle East and North Africa region this year, causing growth to slow to 3% from 5.8% last year, according to the World Bank.Average year-on-year food inflation across 16 Mena economies between March and December 2022 was 29%, which was higher than the headline inflation of 19.4% year-on-year during that period, the World Bank said.The report warned that deteriorating nutrition resulting from high food prices would have long-lasting impacts on child development and future prospects.Clearly, the fallout from the fight against inflation has accentuated vulnerabilities in the global economy. The increase in interest rates by central banks seeking to curb inflation is slowing global economic activity.At the same time, the tightening financial conditions are likely to increase debt distress in emerging markets economies.Yet, high inflation remains a challenge in the short run, especially among economies in the Middle East and North Africa region that have experienced currency depreciation.Even if the spike in inflation, particularly food-price inflation, turns out to be short-lived, the World Bank says it will still result in long-term development challenges that should, in principle, alter public policy priorities in the short- and long-term.