After two years of the pandemic, the UN estimates that the war in Ukraine caused the largest increase in the cost of living in a generation, raising the risk of internal conflict and social protest. The warning, issued on Wednesday, indicates that inflation in food and energy prices could plunge billions of people into the crisis.

According to the survey, the crisis has two aspects. The first is the collapse of incomes of families and governments. Today, 60% of workers have a lower income than before the pandemic. 60% of poor countries live with unpaid debts, and emerging economies leave more than US$1.2 trillion in gaps to meet societal demands.

On the other hand, there is the price boom. The FAO food price index is near record highs, 20.8% higher than at this time last year, according to the UN. Energy prices, at $120 per barrel, are generally expected to increase by 50% in 2022 compared to 2021. In particular, the price of European natural gas has increased tenfold compared to 2020.

Nearly 90 million people in Asia and Africa who previously had access to electricity can no longer meet their basic energy needs. Globally, 30 million people lost access to clean cooking fuel between 2019 and 2021, and the global number is currently down to 2.4 billion.

Fertilizer prices are more than double the average between 2000 and 2020, raising fears that the crisis will continue into 2023.

“If high fertilizer prices continue into the coming growing season, the current wheat and vegetable oil crisis could turn into a rice crisis, affecting billions more in the Americas and Asia,” he said.

Meanwhile, around 4.1 billion people lack social protection and world GDP growth fell from 3.6% to 2.6%.

“This disaster has been building on for years, but since the war it has become unbearable for many countries,” he said. “In 2022, it is estimated that between 179 and 181 million people will face a food crisis or worse. In 2023, another 19 million people around the world are expected to face chronic malnutrition,” he says.

Greater increase in hunger

The number of people facing extreme poverty and acute food insecurity has increased by 77 million and 193 million, respectively, since 2019. “The increase in hunger since the beginning of the war may actually be greater and more widespread,” warns the UN.

The organization estimates that in just two years, the number of people with severe food insecurity has doubled from 135 million before the pandemic to 276 million at the start of 2022. The effects of the war in Ukraine are expected to increase this number to 323. million in 2022

In the case of Latin America, the region should register a 28% increase in food imports, the highest value of any continent.

Another problem is the trade restriction imposed by a few food exporters. According to the UN, the scale of current restrictions has far exceeded the scenario experienced during the 2007/08 food price crisis, affecting 17.3% of total calories traded globally and exacerbating hunger.

Export restrictions during the food price crisis 15 years ago contributed to 40% of the increase in agricultural prices during this period. As of February 24, 2022, 109 restrictive export measures were implemented. Among them is the ban on the export of fertilizers and some food products bought by 63 countries.

Meanwhile, shipping costs are more than three times the pre-pandemic average due to the effects of the Covid-19 crisis and the destruction of transport infrastructure in Ukraine.

The perverse cycle and political instability

According to the UN, there is a reverse cycle. High energy prices, especially diesel and natural gas, increase fertilizer and transportation costs. Both of these factors in turn increase food production costs.

The result is lower agricultural incomes and even higher food prices in the coming season.

“These, in turn, add to what is already increasing interest rate pressures and tightening financial conditions by increasing inflation. Tighter financial conditions are eroding the purchasing power of emerging currencies,” warns the UN.

The fear of the business is that these vicious circles created by the cost of living crisis can also trigger social and political instability. “Higher inflation means higher food and energy prices and a higher cost of living. This reduces families’ real incomes and with it their living standards and opportunities for a better future.” “, warning.

In total, the business estimates that 1.7 billion people live in countries that are severely exposed to at least one of the three transmission channels of the crisis: rising food prices, rising energy prices and tightening financing. “The most worrying thing is that 1.2 billion people live in countries that are exposed to a ‘perfect storm’ from three directions at the same time,” says the UN.