While the world is trying to get out of the repercussions of the Corona pandemic, inflation has imposed itself on one of the largest economies in the world, as the United States is witnessing a huge rise in prices, which has returned international markets to the circle of concern about a forced recession, and other economic pests, according to analysts.
The inflation rate in the United States witnessed a big jump during the month of October, reaching 6.2 percent on an annual basis, the highest level in 31 years. What are the causes of this phenomenon and its repercussions on the rest of the world?
The analyst, professor and lecturer at the American University in Washington, Dr. Gregory Avtandilian, answers in an interview with Al-Hurra, saying: "There are several reasons, but the most important among them is "supply chains."
Avtandilian explained that, "After the easing of Corona restrictions, and the return of companies and individuals to the markets, demand increased in a way that supply could not meet due to a real problem in the supply based on the movement of ships and trucks in various countries of the world."
He added: "Suppliers are unable to keep pace with the rise in demand, due to the record rise in international oil prices, and in light of the increase in demand over supply, prices inevitably rise, and this is what is known economically as inflation."
And oil prices witnessed a record rise before they began to decline this week, as US Vice President Kamala Harris confirmed, last Friday, that the United States is dealing with the rise in oil prices seriously after the rise of crude affected the prices of basic commodities.
President Joe Biden on Wednesday asked the US Competition Authority to "immediately" look into the "potentially illegal" behavior of oil companies that raise fuel prices at stations while "lowering their costs."
The White House called on Federal Trade Commission Chair Lina Khan to "be alert to increasingly clear indications of consumer-harming behavior by oil and gas companies," according to AFP.
Last week, the Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for global oil demand for the fourth quarter by 330,000 barrels per day from its estimates last month, while high energy prices impede the economic recovery from the Covid-19 pandemic.
Avtandilian noted that in addition to the rise in global oil prices, "another reason that led to the obstruction of supply is that suppliers are facing a shortage of workers and truck drivers since the beginning of the pandemic, which has led to the inability to meet the need of markets, after the reopening of economies."
In addition to the supply crisis, "the US government suffers from the fact that expenditures exceed revenues, due to the economic stimulus package that it incurred to confront the outbreak of the pandemic," according to Avtandilian.
And last March, Biden approved the new economic stimulus plan to counter the repercussions of the Corona pandemic, explaining that the new trillion rescue plan would help the middle class.
The plan includes the provision of direct cash assistance to a large segment of Americans in the range of 1,400 dollars, as well as weekly unemployment benefits in the range of 300 dollars until the sixth of next September.
The corporate tax exemption has also been extended for an additional year, until 2026.
As for how things will turn out, Avtandilian expresses his hope that "inflation rates will decrease in the second half of 2022 if there is a development in the resource chain," stressing that "inflation will remain high until this period."
On ways to address this economic phenomenon in the United States, the American economist, Sherif Fahmy, said in an interview with Al-Hurra that "the solution is to maintain the economic infrastructure in the country."
Al-Sharif praised "the performance of the Biden administration, which submitted financial proposals to the Senate that were approved, and most notably the work on rebuilding roads because the United States depends on trucks for supplies and supplies."
Al-Sharif considered that it is necessary to "work also to enhance reliance on the smart world and develop artificial intelligence techniques, to ensure access to economic movement at a low cost that is not affected by external conditions."
The effect of inflation on other countries
Regarding the impact of inflation in the United States on the rest of the countries, Avtandilian says that "it is not a reflection, but a similar one," explaining that "inflation will hit different countries, given that the problem of supply and the rise in prices of raw materials and oil are the same for everyone."
While Sharif says that "the global market is linked to the US dollar, and for example, the UAE dirham is linked to the dollar, which means if the value of the dollar is high, the global economy will be fine, especially in the oil-producing countries, most notably the Gulf states."
Here, the Saudi economic analyst, Yassin Al-Jafri, believes in an interview with Al-Hurra that "the Gulf countries are clearly and directly affected by inflation, as they are more importers than exporters."
He added that "American inflation will become a global pandemic, as it will lead to an increase in the prices of imported goods, and will also affect the exchange rate."
In turn, the Tunisian economic expert residing in France, Ezzedine Saidan, confirms, in an interview with Al-Hurra, that "the European Union is affected by the repercussions of the Corona pandemic, and there is a significant increase in prices, which indicates that inflation rates are increasing significantly."
Saidan considered that "if things continue in this way, that is, the supply remains unable to meet the demand, an explosion may occur whose repercussions cannot be expected."
In the same context, the Jordanian economic analyst, Hossam Ayesh, stresses, in an interview with Al-Hurra website, that clarifying the repercussions on the rest of the countries requires a refutation of government measures to confront the global pandemic.
Ayyash said that "the major governments incurred a lot of expenses, and spent a lot of revenues in order to be able to provide financial stimulus packages to individuals and companies, most notably the European Union and the United States."
He added that "the United States and European countries did not consider, while presenting these packages, whether there was a continuous need to keep them or not, which led to an increase in savings or unspent expenses of families and companies, which led to this wave of increased demand."
He continued, "Unfortunately, the increase in demand was accompanied by the inability of supply to meet the need due to the problem of global supply chains that stumbled or their cost increased due to the increase in energy and raw materials prices, as well as the return of the outbreak of the Corona virus in some countries, most notably China and Southeast Asian countries." .
Ayyash considered that "the current problem is how global central banks deal with inflation, as the United States, and other G20 countries, were rising to gradually re-raising interest rates, but they will now have to stop providing stimulus packages or assistance."
He expected that "governments will be forced to review interest rates at other times than they wanted, and this may affect the final result on the business community and economic growth."
It is reported that the Federal Reserve’s statement, quoting Vice Chairman Richard Clarida, said that while the US central bank remains “far from thinking about raising interest rates,” if its current forecasts for the economy prove correct, “the necessary conditions for raising the target range for the Fed will be completed by the end of 2022.
Inflation, so far, already represents "much more than a moderate overshoot" of the long-term inflation target, Clarida said, adding, "I would not consider repeat performance next year a policy success."
Regarding the impact of all this on the economies of the countries, Al-Sharif says: “The tendency of the United States and even Arab and European countries to raise interest rates will lead to companies and institutions bearing an additional cost, which their conditions after Corona may not be able to bear.”
Al-Sharif lamented that the high interest rates would lead to "the bankruptcy of tens and hundreds of thousands of companies around the world, as well as forcing governments to raise workers' wages."
He added: "Many Arab and developing countries may not allow their circumstances to bear these inevitable measures, which may lead to an increase in unemployment and poverty rates."
He concluded, "Inflation will become the topic of the hour in the world, and it will constitute a state of terror that will strike countries, governments, global central markets, companies and institutions, and even families and individuals through the rise in food and basic prices."
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