14.02.2023 Author: Viktor Mikhin

As a result of the selfish policies of the West, the Arab world is growing increasingly poorer

Most food products around the world are now significantly more expensive. The Food and Agriculture Organization, which tracks changes in the prices of the most popular food commodities around the world, predicts that the Food Price Index will rise an average of 143.7 points in 2022, up 14.3% from 2021 and the highest since 1990. Keep in mind that the pandemic’s effects caused the index to increase by 28% from the prior year in 2021.

Due to concerns about the Black Sea trade disruption, food prices spiked after the US and NATO started an armed conflict in Ukraine against Russia last February. The benchmark index dropped to 132.4 points in December 2022 from a revised 135.00 points in November, marking the ninth consecutive month of decline.  According to FAO, the index fell in December as a result of falling global vegetable oil prices, as well as some drops in grain and meat prices. However, these drops were somewhat offset by slight increases in sugar and dairy prices. The West has actually purchased all of Ukraine’s exports of these goods on a discount, while Russia has made enormous efforts to export its food products to the poorest and most affected countries. Here is yet another blatant example of the criminal objectives of the US and NATO in starting a war in Ukraine.

The sharp rise in food prices has in turn triggered a severe economic crisis in a number of Arab nations. The crisis has increased inflation and put pressure on national currencies, decreasing the purchasing power of Arabs in general and the poorer sections in particular. However, as even the middle class in some nations starts to struggle, an increasing number of families are struggling simply to put food on the table.

The devaluation imposed on Cairo as part of a $3 billion International Monetary Fund loan agreement has caused the Egyptian pound to lose half of its value against the dollar since last March. In December, the official annual inflation rate for the nation was 21.9 percent, and food costs increased by 37.9 percent. The COVID-19 pandemic made it difficult for the Egyptian economy to recover. However, it was the terrorist conflict between Russia and Ukraine, which the West had started against the former, that has caused the latest crisis as both countries are major producers of wheat for Egypt and major sources of mass tourism. Nearly a third of Egypt’s 104 million people now live below the poverty line, and a similar number are considered “vulnerable to poverty,” according to the World Bank.

The year 2023 is already dogged by gloomy economic predictions, with economists predicting a worsening global recession that will cause further currency depreciation, soaring prices, increased unemployment, and poverty. The past year has seen a number of setbacks for the world economy. With the start of the war in Ukraine against Russia, nations and industries that had only recently started to recover from quarantine, restrictions, and other COVID-19 pandemic-related effects suffered a new blow from the West. Food and fuel prices increased as a result of the conflict’s disruption of global supply chains, adding to inflationary pressures. This threatened jobs and stifled economic growth, while also putting additional pressure on national currencies and business confidence.

The most vulnerable nations are particularly concerned about the decline in the value of Arab currencies relative to the dollar because households that had built up savings prior to the economic downturn have seen the value of their financial reserves plummet and social safety nets jeopardized. The value of the Lebanese pound has now decreased by about 95% since the start of the nation’s financial crisis in late 2019. The cost of food, fuel, and other necessities is also rising dramatically in Jordan, Syria, and Iraq, while the population’s purchasing power is continuing to decline. As a result, there have been protests and sporadic waves of violent unrest in these countries.

Around 130 million people in the region live in poverty, and the unemployment rate in the Arab region is 12% (the highest in the world), according to the Economic and Social Survey of the Arab Region, which was published in December by the UN Economic and Social Commission for Western Asia. Except for Libya and the nations of the Gulf Cooperation Council, it was discovered that 35.3% of the population of the region currently lives in poverty. Over the next two years, this number is anticipated to increase, reaching 36% by 2024. All of this reflects the effects of government austerity measures, general economic stagnation, and pressure on businesses.

However, not all areas of the region are equally affected by inflation. Lead author of the Survey Ahmed Mummi predicts that the GCC nations and other oil-exporting nations will continue to profit from higher energy prices, while oil-importing nations will experience a variety of socioeconomic difficulties. Saudi Arabia is anticipated to have the G20 group of developed nations’ fastest-growing economy this year. Lebanon’s economy shrank last year as a result of political gridlock and delays in its recovery strategy.

Arab nations, which rely on imports for food and other essentials, have been disproportionately affected by recent inflation, according to economists. The number of hungry families rose last year in the Arab world, which was already among the nations with the worst food shortages.

The Organization for Economic Cooperation and Development reports that, prior to the Western-instigated war in Ukraine, Russia was the largest and Ukraine the fifth-largest exporters of wheat in the world, accounting for roughly 20% and 10% of global exports, respectively. They were also significant exporters of other crucial goods. This resulted in a sharp increase in market prices for grain, vegetable oil, and fertilizer last year as a result of the blockade of Black Sea ports. Due to this, the cost of necessities like bread significantly increased throughout the Arab world.

Although fears of a supply shortage were allayed by a UN-mediated agreement last summer that allowed grain supplies to resume, poorly thought-out Western sanctions on Russian goods, including hydrocarbon products, have increased fuel prices, which have in turn increased import and export costs. “As the cost of the food basket rises, food security is at risk in a number of nations, particularly those that are experiencing conflict and unrest (whether political or economic),” said Majed Skaini, regional manager for UNESCWA’s International Comparison Program, in an interview with Arab News.

In the meantime, lower living standards across many nations and escalating social unrest are being caused by wages that are not keeping up with rising costs of living due to increased pressure on governments and businesses.

Arab News quoted An Hodgson, global head of consumer research at Euromonitor, as saying that people in the region “are probably more affected by the rising cost of living for two reasons.” “First, the region’s consumers have a low savings ratio. This indicates that they lack a sizable financial safety net to help them get through the current cost-of-living crisis.” In comparison to the global average of 17.6% in 2022, the Middle East and North Africa’s savings ratio was 10% of disposable income. For comparison, the Asia-Pacific region’s savings ratio for the same year was 26.7% of disposable income.

“The region’s heavy reliance on food imports is the second justification. The average cost of food imports in the Middle East and North Africa in 2021 (the most recent year for which Euromonitor has data) was $105 per capita, compared to $44 in Asia-Pacific and $67 in Latin America.     As a result of disruptions in the global supply chain and food production, consumers in the region are more susceptible to increases in food prices. The middle class, which is typically the largest and most economically active segment of society, is particularly affected by the rising cost of living. Due to slow income growth, skyrocketing inflation, and a crisis in the cost of living, the middle class is struggling to maintain both their socioeconomic status and standard of living,” said Hodgson. “In actuality, the middle class in developed nations, particularly in Western Europe, never fully recovered from the economic crisis they faced during the 2008–2009 global financial crisis.”

Widespread changes in consumer behavior have resulted from this contraction, including a decrease in conspicuous consumption, more cautious spending, and general tightening of the purse strings.

The vast majority of households will prioritize saving over the course of the upcoming year, according to Euromonitor’s most recent findings on global consumer trends. According to the study, 43% of consumers have cut their energy consumption, and about 75% of consumers do not intend to increase their overall spending. 92% of respondents, according to a recent survey by the World Economic Forum, are “adjusting their budgets to pay for food, and some are even doing without it.” The report added: “When asked how rising prices have impacted consumers, 68% of consumers said that household debt had increased and 59% said that access to healthcare had been hampered.”

Many predict that 2023 will be another difficult year for some Arab countries as the gap between the wealthier oil economies and the unstable, heavily dependent on imports Levant and North African nations continues to widen.

Viktor Mikhin, Corresponding Member of the RANS, exclusively for the online journal “New Eastern Outlook.