Inflationary-induced economic slowdown and TCI’s financial standing

The global economy is on a downward spiral and experts say inflation could get even higher in 2023. Geopolitical tensions between Russia and Ukraine, and NATO are intensifying the status quo and so is the supplychain bottlenecks and the uneven recovery from the COVID-19 crisis.

Together, these dilemmas have ignited a noticeable epoch

BY D MARKIE SPRING

of stagflation in the world of economics in which economies worldwide suffered high price inflation and low growth for the first time since the 1970s. Sadly, there is no sign inflation is abating in any considerable way; therefore, most economists believe that the world’s economy is headed for a recession this year; hence, they warned, this impending price upsurge can occur sooner and profoundly more devastating than presumed.

The International Labour Organization (ILO), in its latest assessment of the state of the international labour market, warned of intense and lasting uncertainties regarding the shape of the global economy. The Geneva-based ILO convened, the morbid plight of the world’s wealth was depressing business investments; hence, expending real wages and; subsequently, forcing workers to engage in casual jobs.

Comparably, New Zealand Institute of Economic Research found, profits were crumbling, hiring goals were toppling and costs pressures for business in New Zealand remained immensely high. Besides, finding labour is extremely difficult, while workers’ expectations of price rising are at its highest.

Undoubtedly, these phenomena are already negatively impacting the health of TCI’s financial standing, as the supply of goods is depressed owing to the increase in production costs for which oil is an input. If businesses are distressed, then jobs could be lost.

Right now, consumers are feeling the brunt of this cost increase at the pump, which has jumped from $4 a gallon to almost $7. We are cognizant, high oil prices increase manufacturing costs, as well as distribution costs and considering the TCI is a net importer, food prices, which are rising faster, both in supermarkets and restaurants, than we can consume.

Beyond this, high prices are reducing discretionary income, while mounting costs of other consumers’ goods and services are negatively influencing personal consumption expenditure.

Furthermore, the current situation can impact sustainable tourism. Crude oil price has skyrocketed to $80.97 per barrel, in a time when the air travel industry is shaking off restrictions. This hike places the industry under strain and sparks a surge in airfares and cruise prices; hence, the likelihood of a reduction in tourist arrivals.

In October 2021, when oil price was $78 per barrel, the international Air Transport Association opined, fuel costs would account for about 20 per cent of an airline’s expenses; therefore, these figures are expected to rise significantly at $80.87 per barrel.

As the major source of energy, crude oil has a significant impact on the global political and economic dynamics and there is no doubt that this is true for the TCI and; therefore, it is paramount that lawmakers formulate pertinent policies to reduce TCI’s reliance on fossil fuels and strategise to mitigate the current footprints. Food prices, gasoline and utility expenditures are becoming exorbitant and if left unattended, commodities in the TCI can become unaffordable.