Last year, we had quite an upbeat summer as the world began a historic recovery process after 18 months of Covid lockdowns and economic slump. Analysts, perhaps prematurely, predicted an ‘unprecedented growth’ worldwide. Then 2022 set in and all those optimistic projections weathered away with the first gunshot that crossed the Ukrainian border. Today the signs seem to point to a very long hot summer.
The war in Ukraine continues to rage on. It looks like we are going to wait for long before the two sides are ready to stand down, most probably longer than we had thought just a few weeks ago, Nato says. We are talking years, according to Nato Secretary General Jens Stoltenberg.
Stoltenberg called on Nato nations to increase and speed up their military assistance to Ukraine. Ukraine must be able to push the Russian army out at any cost, he says. “We must not weaken in our support of Ukraine, even if the costs are high — not only in terms of military support but also because of rising energy and food prices.”
Those prices will continue to go up alright. Oil prices may reach $150 per barrel soon, economists say. The travel season is upon us and the demand is growing as more countries end Covid restrictions. And there is a very limited supply as the West banned Russian oil sale and due to the inability of Opec countries to produce more. I will not be surprised if oil prices soar above $150.
Oil crisis to fuel price hikes
Higher fuel prices tend to push up almost all other prices due to the increasing cost of transport. There is also the wheat crisis. Ukraine produces 20 per cent of the world’s premium grade wheat. Russia too is a top global exporter of wheat. Today, we are missing out on at least 25 per cent of the normal wheat supply.
Oil and food prices are in turn pushing inflation higher to rates the world hasn’t seen in more than 40 years. Our money is worth less as the cost of living worldwide soars.
A report in The Guardian published early May quoted a research by the London-based Food Foundation as saying that “millions” of people, “including 2.6 million children,” in the UK regularly skip meals altogether or do not eat when they are hungry, because they simply cannot afford them. This in the UK, one of the richest countries in the world. Just imagine the situation in poor countries in Asia and Africa.
From here, the picture gets even gloomier as the US Federal Reserve takes charge. To slow the inflation, the Fed assumed a more hawkish position raising the interest rate by 75 basis points. It is expected to raise the rate again by the same percentage next month, despite warnings from experts that the policy will certainly slow economic activities and eventually lead to a global recession.
Out-of-control inflation
On Wednesday, the Fed’s chief, Jerome Powell, said the central bank was “not trying to induce a recession” but their hands are being forced as they attempt to tame the out-of-control inflation. Higher rates naturally lead to less borrowing and thus fewer dollars in people’s pockets. That will of course lead to less spending, henceforth, a slower economic cycle.
The US stock market saw the writing on the wall. Major Wall Street indices sank for two days in a row, wiping out all the 2021 gains. Dow Jones closed Friday below 30,000 after a stark warning from Deutsche Bank that “an earlier and somewhat more severe recession” is upon us.
The bank had earlier said a recession was expected in 2023. But following the Fed’s Wednesday decision, the bank said the recession will descend earlier than previously projected and will be a very painful one. The US gross domestic product (GDP) growth will “retract to “sub-1%” in the first half of 2023, followed by a -3.1% contraction in the third quarter of 2023.” We are back at pandemic levels.
Resurgence in Covid cases
Speaking of pandemic, the number of Covid cases are going up lately worldwide. More and more countries are bringing back the face mask wearing policy again. Germany alone registered more than 80,000 cases on Saturday. And as the travel season kicks in, the numbers will expectedly multiply across the world. The Coronavirus is not going away. A long and hot summer indeed.
And that is not it, unfortunately. The Middle East may have its share of this perfect summer storm. It is a little different in nature but not much unrelated.
As the world’s attention, especially in the West, is squarely on the Ukraine war, Turkey seems to think it can get away with its own offensive in northern Syria to establish its own ‘buffer zone’, supposedly aimed at alienating what Ankara says a Kurdish threat to its southern borders.
Reports from Turkey and Syria suggest that the attack is imminent. Despite US and Russian warnings — Moscow told Turkey last week such move would be “unwise” — Turkish President Recep Tayyip Erdogan probably thinks the Ukraine war has given him a geostrategic window of opportunity to finish the job he has been planning for years. But as reports from Syria indicate, it is not going to be an easy task.
The Syrian Kurds’ preparations with the help of government forces, Russian advisers, and probably Iran-sponsored militias, will ensure a Ukraine war-style conflict in the region. If history is our guide, summer is the month when military conflicts rage in the Middle East. So, we could be just weeks away from a bloody Turkey offensive.
Skirmishes in Palestine
Meanwhile, there is an already low-level war taking place in Palestine. Over the weekend, Israel launched air attacks on Gaza after it said Hamas had fired a rocket on the southern coastal city of Ashkelon.
Apparently, the rocket was in response to the Israeli forces killing three Palestinians during clashes in the occupied West Bank town of Jenin. Hopefully, the skirmishes, which have been going on for months and intensified following the killing of Palestinian journalist Shereen Abu Aqleh by an Israeli sniper, will not turn into another full-blown war.
Is there a chance all of this summer gloomy scenario could subside? Sure. But very little chance. The breathless pace of events points to a perfect storm on several fronts — military conflicts, economic recession, food crisis and a resurgent pandemic. But it is not too late to spare the world another tremor, and quite a painful one.
