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Beware the risks of triple crisis following the pandemic
While Indonesia is still faring relatively well amid the prolonged global shocks to food, energy and finance, this should not be taken for granted.
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Workers transfer crude palm oil to tanker trucks on April 7, 2022 at Tanjung Emas port in Semarang, Central Java, for transporting to cooking oil packaging factories. (AFP/Daffa Ramya Kanzuddin )
T
he COVID-19 pandemic has gradually subsided in many parts of the world in line with notable progress in the vaccine rollout. Mobility and economic activities have increased significantly. As demand rises with the resumption of economic activities, commodity prices have also risen.
However, as supply chain disruptions from the COVID-19 pandemic are not fully resolved, the soaring trend in commodity prices is prolonged.
The Russia-Ukraine war has exacerbated the upsurge in commodity prices since February. It has disrupted the supply side even further, as Russia and Ukraine are among the biggest producers of energy and food products.
Russia is the third biggest producer of fuels, contributing around 8.7 percent of total world exports. As for food, Russia is the biggest fertilizer exporter, contributing 12.6 percent globally, and is the third biggest exporter of cereals. Meanwhile, Ukraine is the second and third biggest exporter of cereals and vegetable oils (sunflower), respectively.
Russia and Ukraine combined contribute around 16 percent of global cereal exports. Indirectly, the war’s impacts are inevitably felt worldwide through the price channel, particularly the poor importing countries in Asia and Africa.
Clearly, the war puts immense pressures on the world’s food and energy markets. The prices of wheat, corn, grains, soybean and crude palm oil (CPO) have skyrocketed with severe supply shortages. Oil prices have stayed above US$100 per barrel since late February, while coal prices have jumped through the roof.
Import bills for food and energy commodities are already at record levels, and it seems inevitable that they will continue to rise. The consequences for poorer and vulnerable countries will be particularly severe. Most Sub-Saharan and North African countries rely heavily (more than 70 percent) of wheat imports from Russia and Ukraine together. With weak social safety nets and limited fiscal space, sharply rising food prices could trigger social unrest in those countries.
