Every year, the cost of many items and services, including necessities like food, petrol, and electricity, rises. So as prices grow, the same amount of money may be able to buy less than before.
The Consumer Price Index-CPI measures how much a basket of goods and services costs. Inflation is defined as a change in the Consumer Price Index (CPI) or the prices of a basket of goods and services.
The cost of living in Europe increases as the eurozone’s inflation rate reaches new highs. As a result, households would spend 54 percent more on energy this year than in 2020, following a fourfold increase in energy market prices across Europe.
The UK’s cost-of-living issue, which has seen energy bills and other price spikes put a strain on many household budgets, is a global problem exacerbated by Covid, the Ukraine conflict, and other causes.
While European countries have taken steps to safeguard consumers from the full impact of the global energy crisis, the United Kingdom’s government has stayed deafeningly mute.
The UK has failed to act, fearing that record-high energy prices could trigger economy-wide inflation and a cost-of-living disaster.
What will be the rise in energy bills?
This spring, the energy price cap was raised to a new high, with Ofgem permitting suppliers to increase electricity and gas bills by 50%.
The average home will spend an additional £620 per year on gas and electricity due to this hefty increase.
The increase will affect around 22 million families, with average yearly expenses of £1,915 per family.
Will there be an increase in food prices?
The weekly shop setback is increasing at the quickest rate on record. In January 2022, annual inflation in stores increased to 1.5 percent, up from 0.8 percent in December.
European governments are being encouraged to intervene, and several have already begun implementing new policies to address rising living costs for their populations.
So, with other countries experiencing the same challenge, how are they dealing with it? let’s check it out
Power generation and house heating are heavily dependent on gas, same as in the UK. Unlike the UK, its government acted quickly to provide a multibillion-euro package of measures to safeguard individuals and small companies within weeks of energy markets hitting record highs.
In October, the Dutch cabinet decided to lower energy taxes, saving families an average of €400 per year (£332.79). A further €150 million will be placed aside to improve house insulation. Small businesses will be compensated with an additional €500 million in lower energy taxes.
The €3.2 billion measures began on January 1 and lasted a year.
The French government has already reduced specific power tariffs to assist curb the growth in household energy costs, for €8 billion to the country.
It will also utilize its ability to compel EDF, the state-owned electricity provider, to reduce electricity costs by charging substantially below-market prices for the electricity it generates. EDF informed its investors that the proposal would cost an estimated €8.4 billion (£7 billion).
Spain’s government was among the first to take action to protect residents from rising energy expenses.
Until June 30, fuel will be subsidized by 20c per liter (or kg), with the government paying 15c and energy providers contributing 5%. As part of its emergency measures, it will reduce connection fees and tax surplus earnings.
Rental increases are likewise restricted to a maximum of 2%. In recent months, civil instability has erupted throughout the nation, leaving gaps on shop shelves. As a result, farmers, fishers, taxi drivers, and influential labor groups have recently gone to the streets.
Because of the worldwide gas crisis, Italian homeowners pay some of the highest energy prices in Europe and should face one of the most significant hikes in energy bills.
The Italian government will reduce the price of gasoline at the pump by 15 cents a liter. In addition, it is seeking a European-wide agreement on an energy price ceiling.
Consumer items are also becoming more expensive, with one estimate predicting that a normally €1 espresso will cost €1.50 in 2022.
Although it did distribute cash to residents during the epidemic, the US has typically been unwilling to actively utilize levers to engage in markets.
It intends to release oil from its reserves to assist stabilize the price of gasoline, which is politically crucial in a country that is more reliant on personal transportation than others.
For example, Bacon, milk, and fruits have all witnessed a significant spike in price. Bacon prices have risen by 8.4%, while whole milk and citrus fruit prices have risen by 7.5 and 8.7%.
The government has defaulted on its $51 billion foreign debt and hopes for a $4 billion loan from the International Monetary Fund.
The Ceylon Petroleum Corporation, a state-owned company in Sri Lanka, has hiked the price of 92 octane gasoline to LKR 338 per liter, an increase of LKR 84. The higher price – almost $80 per liter – adds to the strain on Sri Lankans, enduring the island nation’s worst financial crisis in living memory.
The country is in the grip of a crisis caused by a lack of foreign currency, leaving it impossible to import necessities such as food and gasoline. As the cost of living rises, the Sri Lankan rupee has plunged by more than 60%.
Sri Lanka’s food costs rose by 21.1 percent due to the rising demand for several essential food goods. After a 12.5 percent price increase in milk powder,
A standard cooking gas cylinder has increased by roughly 85 percent, from $7.50 to $13.25. Sri Lanka, a 22-million-strong island nation, is amidst a historic economic downturn.
Sri Lanka’s problems have been exacerbated by the epidemic and rising worldwide petroleum costs. In addition, tourism, the country’s largest source of revenue, has been severely harmed by the epidemic, which has resulted in foreign flights being suspended.
Egypt’s food security dilemma has become an existential danger to its economy after the commencement of the Russia-Ukraine conflict on February 24, 2022.
To secure a sufficient and cheap supply of bread and vegetable oil for its 105 million residents, Cairo relies on heavily subsidized imports.
Egypt’s wheat and sunflower oil prices soared by 44 percent and 32 percent, respectively, due to the Russia-Ukraine war. Worse, the war poses a direct threat to Egypt’s physical supply, as 85 percent of the country’s wheat is imported from Russia and Ukraine.
The world’s top wheat consumer already feels the heat from its massive bread subsidy scheme. Following a jump in bread costs, the nation recently imposed a fixed price for unsubsidized bread and is now attempting to secure wheat imports from India and Argentina.
Pakistan’s Prime Minister Imran Khan was removed in a no-confidence vote. As a result, Pakistan’s inflation rate will exceed 15%. In addition, Pakistan might face a significant balance of payment (BoP) problem, as the State Bank of Pakistan’s reserves has dropped to a dangerous level of $11 billion.
Imports are growing, as evidenced by senses accounted for 52.2 percent of the latest increase in tax revenue. However, the trade gap in the country is alarmingly high, at $35 billion. Despite its frighteningly low reserves, Pakistan is anticipated to service $2.5 billion in debt in the current quarter (April to June) of 2022.
The Remainder of the Globe
The rest of the globe is being buffeted by the same storms: Covid, followed by skyrocketing food and gasoline costs, and then Russia’s invasion of Ukraine, which has resulted in yet another significant increase in the price of necessities. The difference is that most other nations lack our riches and our social security and infrastructural systems.
More than 6 million people in Somalia would face “crisis, emergency, or catastrophic famine levels” over the following days.