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Eastern EU may target those vulnerable to inflation

Monday, January 9, 2023

Significance

Russia’s invasion of Ukraine cut the supply of major staples to the Baltic states and the Visegrad Four (V4: Czechia, Hungary, Poland and Slovakia). Local factors, such as import intensity, tight labour markets forcing up wages, low food-industry productivity and depreciating currencies, have exacerbated global trends and intensified cost-of-living crises.

Impacts

  • If food prices remain high, they could fuel social unrest, political instability and appetites for the ‘easy fixes’ of populism.
  • If populist politicians take power, they could upset rational economic policies and post-invasion recoveries.
  • Shaky institutions, political instability and non-diversified economies are central factors exacerbating the war’s effects on food prices.
  • Ukrainian refugees may relieve some labour market tightness (a factor fuelling inflation) but it may take time to absorb enough of them.

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