Inflation widens chasm of global inequality

With Ukraine crisis worsening hunger, rich and poor moving even further apart

Editor's note: More than 100 days into Russia's special military operation, China Daily presents two pages of special coverage on the milestone, which fell on Friday. From surging inflation and setbacks to green-energy goals to the plight of refugees, the impact of the conflict is examined.

Economists are warning that surging inflation in Europe and beyond threatens to force millions into debt and destitution in a bleak view that contrasts with the enormous profits posted by companies in the food and energy sectors.

Inflation in the eurozone reached 8.1 percent in May, up from 7.4 percent in April, according to data from the European Commission's statistics office published on Tuesday, reaching a record high for a seventh consecutive month.

Recent inflation in Germany outstripped forecasts by more than half a percentage point, rising from 7.8 percent in April to 8.7 percent in May. French inflation rose from 5.4 percent to 5.8 percent over the period, and inflation in the United Kingdom reached 9 percent in April, its highest level in over 40 years.

As central banks and finance departments attempt to navigate these economic challenges to stave off recession, the real-world situation for low-income households is even worse than the official figures suggest.

The Russia-Ukraine conflict has caused major disruptions to grain and gas exports, sending food and energy bills skyrocketing, and the London-based Institute for Fiscal Studies, or IFS, warns that low earners are disproportionately affected.

"As poorer households spend more of their budgets on gas and electricity, this increase is likely to hit poorer households harder," IFS Research Economist Heidi Karjalainen said.

In terms of income, the bottom 10 percent of British households spend 11 percent of their earnings on gas and electricity, which is almost three times more than the highest tenth. In the UK, prices for several food staples including rice, bread, and beef mince all increased by more than 10 percent in April compared with the same month last year, according to the Office for National Statistics, and the price of pasta has risen by 50 percent over the period.

The Bank of England projects that inflation will reach 10 percent in the UK in October, and the IFS analysis suggests that this translates to a 14 percent inflation rate for the poorest households in the UK, compared with 8 percent for the richest.

A separate analysis by the London-based National Institute of Economic and Social Research, or NIESR, predicts that rising inflation means 1.5 million UK households will face food and energy bills that consume all disposable income throughout the next two years, and an extra 250,000 British households will fall into extreme poverty, taking the total number to 1.2 million.

In a policy U-turn, UK Chancellor of the Exchequer Rishi Sunak last week announced a 15-billion-pound ($18.9 billion) emergency package, including a 5-billion-pound temporary windfall tax on energy companies, in order to ease some of the burdens on struggling households.

The NIESR forecasts that annual consumer price inflation will peak in the fourth quarter of 2022 and remain above target through 2023.

"Persistently high inflation and a forecast shallow recession at the end of 2022 mean the Bank of England continues to sail in treacherous seas with a risk of potentially deepening the recession if rates are hiked rigorously," said Urvish Patel, an associate economist at the NIESR.

In a report published last week, the global poverty charity Oxfam drew a stark contrast between the prospects of the haves and have-nots over the pandemic period.

Oxfam found that the wealth of the world's billionaires rose more in the first 24 months of COVID-19 than in the previous 23 years combined, and billionaires in the food and energy sectors are increasing their fortunes by $1 billion every two days. In contrast, the charity predicts that inflation will plunge 263 million more people into extreme poverty this year.