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The effects of the Russia-Ukraine war on our inflation

We are realizing it: inflation is uphill and, in the long run, it can significantly decrease the value of the laboriously saved money over time.

The concept is simple: if prices rise, the same amount of money will buy fewer goods and services. And here we are, so is the current situation.

The causes of inflation can be different: they can have an endogenous nature, that is linked to phenomena within the countries in which it occurs, or exogenous, caused by events that occur in other countries, but which in any case also affect other parts of the world.

So the question is: how much does this Russia-Ukraine war affect inflation?

Surely on the Russian one a lot: in Russia consumer prices are flying after the rain of sanctions that caused the ruble to collapse and interrupt foreign trade. The costs of cars jumped by 17%, those of televisions by 15%, smartphones by 14.6%, the price of some medicines and vegetables increased by 7%.

With us it is evident that on gas and electricity the effects of the war were felt: Italy depends a lot on Russia for supplies of gas. We do not have diversified our sources and we did not focus on internal production and this is the consequence. In addition, there is the risk that President Vladimir Putin may decide to to cut supplies in response to sanctions, which would further aggravate the situation as the European Union imports from Russia about every year 155 billions of cubic meters of gas. In 2021, about 45% of community supplies, from which a little less than 40% of total consumption.

But it is not just gas that is the crux: the effects of the war are also being felt on shopping at the supermarket since Russia and Ukraine, consider the granary of Europe, they are responsible for about a quarter of the world production of wheat and half of that which concerns the products obtained from sunflowerlike oil.

If the cost of energy and food were to be pushed further by the crisis in the East, analysts warn that the rate of inflation could rise to 10% throughout the West.

And the spiral would begin: the banks could in fact decide to raise interest rates to stop the growth of prices, but at that point who had entered into agreements with financial institutions for loans and mortgages he may have a hard time paying them back.

In short, yes, of course, this war has an impact on prices and the confirmation (if needed) also comes from Assoutenti: “Prices are rising, a sting of + 1,751 euros per year for the” typical “family”, explains the president Furio Truzzi, «Numbers destined, however, to worsen due to the conflict that has broken out in Ukraine, and which has led to a surge in the prices of raw materials, from wheat to oil, passing through gas and gold. The real risk is that in the short term the price lists of some consumer products, also due to speculations always lurking, could undergo very strong increases in Italy, starting with pasta which could increase by + 30%, while bread, sweets and products derived from wheat are likely to rise by a further + 10 / + 15%. For this reason, we ask the Government to launch a state of emergency prices and adopt special measures capable of containing the growth of retail price lists, given that the flare-up of inflation will produce a strong contraction in consumption by households and damage to households. national economy. It is necessary to resort to administered prices for a basket of indispensable goods that families cannot do without, starting with food products ”.

Source: Vanity Fair

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