Russia’s invasion of Ukraine has led to surging global oil and food prices and the International Monetary Fund has announced that sub-Saharan Africa’s inflation rate increased by nearly 4 percentage points to 12.2% due to the invasion. Higher prices will “erode living standards quite a bit in many countries,” said IMF’s Africa Director Abebe Aemro Selassie at the just-ended spring meetings of the IMF and World Bank in Washington, D.C.

Small businesses are already feeling the pain.

“When inflation hit, most of our clients — some who had been with us long — started to cut down from spending maybe from ZAR10,000 ($632.39) to ZAR1,000 ($63.24) as things like cooking oil and fuel were going up,” said Malesela Rachel Ouma Tema, owner of the small South African clothing company Plus Fab, in a comment provided to OZY. The company has been operating for ten years and receives orders from the British Caribbean, the U.K., the U.S., Nigeria, Ghana, Botswana, Zimbabwe and Swaziland.

“We are a fashion business, so not a priority for most,” said Tema. “We have had to retrench a lot of our workers and take pay cuts by as much as half — so inflation has really been hitting our business.” According to the IMF, sub-Saharan Africa’s two largest economies, South Africa and Nigeria, will see decelerated growth this year. In Nigeria, inflation and global uncertainty around oil prices have combined with rising security risks and low vaccination rates to hold down economic growth.

The Zimbabwe dollar (ZWL) is depreciating rapidly, signaling a lack of confidence in the currency.

According to official data from the Reserve Bank of Zimbabwe, the U.S. dollar currently is trading at ZWL166 — but in the country’s parallel foreign exchange market, it’s ZWL400 on the dollar, indicating that the government is attempting to prop up its currency. And now Zimbabwe President Emmerson Mnangagwa has revealed plans to adopt Russian President Vladimir Putin’s recent strategy to save the ruble, by requiring international purchases of Zimbabwean natural resources to be made in local currency. Thus, in Zimbabwe, “any investor that comes in here must buy using the Zimbabwean dollar,” Mnangagwa said. (Source: Bloomberg)

As the U.S. experiences its worst inflation in decades, businesses are reporting reduced consumer demand. Marlboro maker Altria Group Inc says cigarette smokers are trading down for cheaper brands, while Sleep Number and Tempur Sealy International have announced falling demand for mattresses — a common big-ticket item. Last week, the U.S. Department of Commerce reported that gross domestic product dropped 1.4% on an annualized basis in the first quarter of 2022. (Sources: Bloomberg, The Wall Street Journal, The Financial Times)

The Fed’s action this week to raise interest rates by .5% — instead of the usual .25% — was an attempt to dry up liquidity and curb rising price levels, but has also sparked market turbulence. President Biden is under pressure to curtail U.S. inflation, which reached 8.5% by March: the highest rate since 1981. (Sources: Bloomberg, The Economist, The New York Times, The Wall Street Journal)

With global food prices surging due to Russia’s invasion of Ukraine, South America has struggled. In a continent that relies heavily on wheat, corn and fertilizers, Brazil may have found the answer. According to The Economist, agricultural techniques that combine crops and livestock with forestry practices can make a farm five times more productive than the current average across Brazilian agriculture. At present, however, such techniques are used on only about 5% of the country’s farmland. (Sources: Bloomberg, The Economist, The Wall Street Journal)

Moscow has demanded that European buyers pay for its oil and gas in Russian rubles, as President Vladimir Putin seeks to stabilize a currency hard hit by economic sanctions. In response, EU energy ministers have proposed banning the purchase of Russian crude oil and gas while seeking alternative energy sources. “We are also pushing within the EU to now phase out oil together,” German Foreign Minister Annalena Baerbock told public broadcaster ARD. (Sources: The Wall Street Journal, Bloomberg, The Financial Times, The Washington Post)

On Monday the EU accused Apple of breaching antitrust laws, charging that the company is not allowing other mobile app payment methods on its iOS platform — which effectively forces consumers to use its own Apple Pay. “Apple has built a closed ecosystem around its devices and its operating system,” said EU Executive Vice President Margrethe Vestager, the bloc’s competition commissioner. Apple, however, denies that it is blocking competitors. (Sources: The Wall Street Journal, Bloomberg, The New York Times, The Financial Times)

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Some economists are predicting a recession for the world’s number two economy. Due to a recent COVID-19 outbreak, the Chinese government has implemented more stringent restrictions to curb infections. But these restrictions take an economic toll and impact global supply chains. Disruptions are occurring in the major financial hub of Shanghai and the auto manufacturing center, Changchun. (Sources: Bloomberg, The Wall Street Journal, The New York Times)

Singapore’s prime minister, Lee Hsien Loong, has told the country to brace for more economic challenges, pointing to high global inflation rates and tightening monetary policies. Loong predicts a global recession within the next two years. “Even before Ukraine, inflation was already a problem, but the war has made it worse,” he said. (Source: Bloomberg)

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