Rising Food and Energy Prices in the Europe and Central Asia Region

Global markets are again witnessing a period of rising commodity prices. Part of the current increase is attributed to temporary factors, while a portion is attributed to longer term trends in commodity markets. Of immediate concern has been the impact of rising fuel and food prices on global incomes, macroeconomic imbalances and national poverty. Countries that are large net food and fuel importers in global markets are particularly vulnerable to world price changes, as are countries where there is high food and fuel price inflation affecting the poor. This paper presents the possible impact of rising food and fuel prices on ECA countries’ macroeconomic and poverty outcomes. Its purpose is to illustrate the possible short run consequences of rising prices and the countries that are most likely to be significantly affected, both adversely and positively, while noting the importance of medium-term policy and non-policy related factors that could mitigate adverse consequences of commodity price increases. In ECA, low and lower middle income countries tend to be more vulnerable to rising food and fuel prices, while a handful of ECA countries export substantial amounts to world wheat and fuel markets. The paper presents an initial assessment of a still evolving situation. Further analysis at the country level will be undertaken as the situation evolves. Should the need arise, and collaborating with partners, the World Bank stands ready to assist clients in ensuring that food and finance reach the most affected countries, to work with countries in developing their social assistance systems as needed, and to develop and rationalize their agriculture and energy sectors.

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