Inflation Amid Two Crises

Contrasting Inflationary Trends Among Advanced Economies Post-Pandemic and Ukraine War

Advanced economies encountered the most severe inflationary pressures in almost four decades, dating back to 1982. The annual inflation rate reached 7.3% in 2022, peaking at 8.0% in October of the same year. After a nine-year period of subdued inflation (below 2%) from 2012 to 2020, advanced economies saw a surge in inflation in 2022. The annual inflation rate, which was at 0.4% in November 2020, gradually increased, reaching 6.1% in February 2022. Subsequently, after Russia's invasion of Ukraine, inflation continued to escalate, peaking around 8% from June to October 2022. From November 2022 onwards, inflation gradually receded, reaching 3.2% in December 2023.

Several factors on both the supply and demand sides contributed to high inflation, including supply chain disruptions, rising commodity and import prices, increased production costs, post-pandemic consumption growth, speculation, and expansionary monetary policies.

European countries, in general, experienced higher inflation compared to other advanced economies, primarily due to elevated energy prices, especially natural gas, as a consequence of Russia sanctions. In October 2022, the inflation rate in the European Union was 11.5%, while the United States recorded 9.1% in June 2022.

The peak of inflation occurred in advanced economies between June 2022 and February 2023. Different countries experienced varying trajectories during this period. Some countries, such as Switzerland, Taiwan, Hong Kong, and Japan, had a lower inflationary peak ranging from 3.5% to 4%, while others, including Czechia, Netherlands, Belgium, Italy, Sweden, Greece, Austria, and Germany, faced higher inflation ranging from 12% to 18%. Certain East European countries, such as Estonia, Lithuania, and Latvia, experienced a significant inflation peak between 22% and 25%.