Experts around the world have voiced concern over the increase in prices of products and services during the current year. There are differing views on the factors contributing to this trend, which some experts insisting that 2022 will witness an uptick in the prices of goods, products and services. Others believe that inflation is a temporary phenomenon and will ease when more international markets return to stability following pandemic-induced disruptions.
The latest Covid variant continues to exert negative pressure on markets at a time when imports and exports are still in the throes of a transportation and supply crunch fueled by high prices of freight, transport, insurance and other costs. In this regard, some institutions expect inflation to peak at around the middle of this year before declining to moderate and more reassuring levels for the rest of the year and into the early part of 2023.
Investment management firm Invesco believes that the inflationary impact may not be as adverse as it was at the beginning of the pandemic in January 2020, as most economies began shutting down. But today we see that markets have begun to adapt to a large extent to the current pandemic situation amid an intensifying vaccine rollout, stimulus measures and pro-business policies.
According to Rob Waldner, Chief Strategist and Head of Macro-research at Invesco, 2023 will see world economies transitioning to a more normal economic environment. During the pandemic, consumers spent more on tradable goods compared to services, which contributed to supply chain problems and increased inflation. With these issues addressed, the central banks are expected to raise the interest rate to counter the high levels of inflation.
The problem of inflation will remain present at least in the short term, but it affects consumers and worries investors as well. The current inflation is linked to the pandemic, and this happened as a result of the increase in demand for some commodities since the beginning of the pandemic. Experts see no reason to be wary of more negative fallout going forward, now that countries are taking measures to vaccinate their populations, and facilitate economic recovery, which in turn will spur the resumption of spending and the demand for goods, particularly essential commodities and products, especially essential ones.
Also, we should not forget that the problem of energy price inflation from oil and gas is currently increasing with the recovery of economies and the demand for certain goods and services. However, suppliers today are working to provide a large assortment of different goods to display in their stores to reduce the price crisis, while people boost spending as economies recover. It is normal for the markets to fluctuate during the transitional period, at a time when the concerned companies are working to solve the problems of shortage of supplies, logistical problems in the field of transportation and delivery, and shortage of labour, all of which contribute to creating significant upward pressures on prices and inflation levels in general.
Haider al Lawati
The writer works in the field of economic journalism in Oman newspapers and the economic and media sections in OCCI and the Central Bank of Oman
