As long as the global economy unlocks from the constraints of the pandemic, economic activity will continue to rise. As it is understood, the problem of increases in consumer prices is not only Cypriot but quite intense in the major EU economies.
The Director of Financial Studies of the Hellenic Bank Mr. Andreas Assiotis, speaking to “P” stressed that the increase in global inflation is mainly due to the fact that in the last year and a half governments have implemented unprecedented fiscal support to their economies to maintain employment and disposable income of their citizens. He went on to say that maintaining disposable income by consumers creates a fertile ground to increase their consumer spending and therefore demand will move upwards, he said.
It is noted that between November 2020 and March 2021 the price of iron increased by 110%. At the same time, in a recent report, the Organization for Economic Co-operation and Development (OECD) explains that the increase in demand for raw materials is due to increased demand in the Chinese construction sector. It is worth mentioning that China produces about 50% of the world supply and consumption of iron. Thus, China's economic recovery, combined with other emerging Asian economies, amplifies this demand and leads to increases in the supply chain that is passed on to products.
However, the increase in prices is not limited to raw materials, but also to food prices, such as cereals, coffee, sugar, vegetable oils, etc. In April 2021, the FAO (International Food and Agriculture Organization) price index rose 30.8% compared to the same month a year ago and is the highest point in the last decade. According to international reports, Fonterra, the largest dairy export company, predicted that milk prices would reach record levels, mainly due to increased demand from China. In terms of the price of coffee, it is at its highest point in the last four years due, among other things, to the drought in Brazil, which is the largest producer in the world.