The saying "the world after the Ukraine crisis is not the same as before" has proven true. Today, the world is preoccupied with two pressing issues that bother the major economic and financial policymakers: stagflation and gas shortages. These issues are being addressed to avoid future crises that are increasingly close to exploding, creating complications that both developed and developing countries fear as they face the onset of stagflation, following a rise in fears of this phenomenon reaching its highest level since 2008, according to a report by Bank of America.
Amid significant turmoil in financial and stock markets last week, characterized by skepticism and uncertainty, an international economic expert told the "Central" agency that sectors such as tourism, entertainment, automobile manufacturing, and oil and gas continue to lead "collective losses" due to investor concerns about persistent inflation lasting longer than expected, forcing central banks worldwide to tighten monetary policies further to contain it.
The root causes began with the resurgence of the COVID-19 crisis in China, which did not allow economies to catch their breath, and second, the disruption of global supply chains due to the ongoing military conflict in Ukraine, which has impacted international trade channels for grains and oil, threatening unprecedented crises. Consequently, famine is knocking on the doors of poor countries, severely affecting the most vulnerable communities, but it will also significantly impact wealthy nations with soaring prices due to supply shortages. This situation is exacerbated as the wheat harvest crisis in Ukraine begins next July, leaving grain silos overflowing and lacking storage space while around 20 million tons of grains intended for the global market remain stuck due to the war.
Regarding recent discussions about "safe maritime corridors" to ensure the resupply of goods, serious obstacles remain, most notably the mines planted by Ukraine, which require at least six months to clear with international assistance. There is also the anticipated dispute between Moscow and Kyiv over sharing revenues from any export operations that may commence from Ukrainian ports, especially since the port of Odessa remains under Ukrainian control, while Mariupol and Kherson are under Russian control.
The expert noted that this volatile military and economic scene recently compelled the world's largest economy (the American economy) to raise interest rates by 75 basis points to curb inflation, which has surged to about 8.6 percent. This decision aimed to create a shock to the markets despite the warnings of its inevitable effect of further slowing down the economy. This decision necessitated similar initiatives from around 50 central banks worldwide to contain the consequences of inflation, which has reached about 7.4 percent in the Eurozone, well above the European Central Bank's inflation target of around 2 percent.
Is the world to fear stagflation? This implies a prolonged period of weak growth coupled with high inflation. Some experts suggest this could commence this year, but the risks will undoubtedly be greater in 2023. Where does Lebanon fit into this picture, especially while it struggles with its constitutional obligations? There is no doubt that the fact that 80 percent of Lebanese citizens live below the poverty line in all its forms is a result of the hyperinflation afflicting the economy and the Lebanese pound losing nearly 90 percent of its value.
However, the expansion of the "hunger crisis," which the international community warns about, is uncertain, primarily due to the majority of Lebanese being linked to remittance flows from expatriates that have maintained an acceptable pace estimated at around $7 billion annually. The conclusion is that "Lebanon's crises will continue unfolding unless the political authority takes steps to respect the timelines of constitutional obligations, commencing and culminating in the appointment of a rescue government tasked with signing the reform program with the International Monetary Fund, thereby reconnecting Lebanon with its Western and Arab environment."
