QNB discusses what drives divergent EM inflation? – The Peninsula

QNB discusses what drives divergent EM inflation? – The Peninsula

Doha: Elevated inflation has been a dominant topic throughout this year. Across countries, inflation has been driven by demand and supply factors, often amplified by exogenous shocks or non-economic factors. On the demand side, it is mostly a product of excess consumption created by ultra-loose monetary and fiscal policies in advanced economies. On the supply side, it is negatively affected by supply-chain constraints, tight labour markets and the persistent lack of investment in extracting fossil fuels. Supply-side constraints have been recently magnified by the war in Ukraine, which caused a surge in energy and commodity prices in early 2022.

High or chronic inflation is oftentimes a phenomenon experienced by emerging markets (EM). This is also true in times where inflation is a concern across the globe. This article sheds further light on the different drivers of EM inflation.

The high level of inflation in Central and Eastern Europe (CEE) this year is primarily due to their more direct exposure to higher energy prices caused by the war in Ukraine. Although energy prices have risen globally, it is more difficult for countries in CEE to substitute their energy away from gas, which has been cheaply supplied to them by Russia for most of