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“Higher food prices can be a catalyst” for unrest, Tatiana Lysenko, lead economist for EMEA emerging markets at S&P Global Ratings in Paris, tells The Africa Report. Regardless of the duration of the war in Ukraine, food inflation risks for 2023 are building already because of fertiliser shortages and disruption to the planting of crops in Ukraine, she adds.
Political and social instability in the region, as new research from S&P notes, has historically been correlated with rising food prices. Examples include bread riots in Egypt and Morocco in 1977 and 1984, protests in 1989 in Jordan, and 2008 upheaval across the region. The Arab Spring in 2011 also coincided with sharp increases in food prices.
“Governments are well aware of this link, so are likely to respond,” Lysenko says. Plans to reform food subsidies in Egypt have been postponed, and, across the region, moves to protect the population from spiralling food prices will mean “worsening fiscal dynamics,” she adds.
Five countries in the Middle East and North Africa, Egypt, Jordan, Lebanon, Morocco and Tunisia, are among the hardest-hit. Their net food and energy imports account for between 4% and 17% of their GDP and they source a large part of their cereals from Russia and Ukraine, S&P says.
Emerging markets in general are more exposed to higher energy prices than to food costs, Lysenko says. But in North Africa, food is just as important as energy, and takes on an added political significance due to the high proportion of incomes spent on it.
- Egypt is the world’s largest importer of wheat and gets about 85% of its wheat imports from Russia and Ukraine. In addition, 73% of Egypt’s sunflower oil supply comes from those warring countries.
- Morocco received most of its 2022 annual wheat orders from Ukraine before the conflict started, and its position as a large potash exporter gives it some protection, S&P says. But its economy is still vulnerable to the conflict given high reliance on cereal imports, S&P adds.
- In the Middle East and North Africa region as a whole, Lebanon and Jordan are the most exposed, as more than 10% of GDP is spent on energy and food imports, S&P says.
Food prices are part of the relationships of trust and distrust that exist between governments and populations. S&P’s research shows that in North Africa, low-income groups are far more likely to distrust their government than those on higher incomes. More than 40% of low-income Tunisians distrust the government, compared with just over 30% in Morocco and just under 30% in Egypt, the research shows.
The poorest social groups are most affected by the current global inflation because they spend the highest proportion of their incomes on cereals and buy little meat, says Valerijs Rezvijs, an economist at S&P Global Ratings in London. The issue of youth unemployment and government responses to it are important factors influencing the likelihood of social instability, he adds.
- Despite improvements in Egypt and Tunisia over the past 10 years, youth unemployment levels in the Middle East and North Africa remain among the highest in the world outside sub-Saharan Africa, S&P says.
- In Egypt, Tunisia, and Morocco the proportion of young people in the total population is likely to increase over the next 10-15 years, S&P adds.
- If job creation fails to keep pace, “youth unemployment will increase again, raising the risk of social unrest.”
More jobs for young people will be needed to ensure long-term stability in North Africa.
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