The constant increase in food prices poses a serious threat to millions of families, warned the Organization for Economic Cooperation and Development (OCDE), which doubled its inflation forecast for 2022 from 4.4 percent to 9 percent. This adjustment follows recent increases in food and energy prices and bottlenecks across supply chains.
The rising inflation affects all the population in Mexico but especially the poorest households. According to the National Consumer Price Index (CPI), families in deciles I and II dedicate half of their income (50.2 percent) to food. Inflation hit 7.6 percent in May, according to INEGI, hitting millions of Mexicans families.
“High inflation is eroding household incomes and spending, hitting the most vulnerable particularly hard. The threat of a severe food crisis remains very serious for the world's poorest economies, due to the high risk of supply shortages and high food costs,” said the OCDE in its Economic Perspective.
Furthermore, the World Bank reduced its forecast for Mexico’s GDP to 1.7 percent. The country is expected to return to its normal inflation of 3-4 percent in the first months of 2024. “In general terms, the inflationary trajectory suggests that there will still be pressures during this year and that they will decrease towards the first half of 2023, although it will not be until 2024 that inflation could return to the threshold of Banco de México's target of 3-4 percent,” said José Luis de la Cruz, President, Economic Studies Commission (CONCAMIN).
President Andrés Manuel López Obrador launched the Inflation and Deficiency Package (PACIC) to fight this problem by controlling the prices of 24 basic items through different programs of production and the participation of private businesses.
Inflation is hitting economies worldwide. Mexico’s northern neighbor, the US, was hit with a 5.9 percent inflation. “We are reaching the peak of inflation and we have to take into account that this has to do not only with the price of oil, but also with the problems in global supply chains,” said Kathryn Rooney Vera, Global Director of Macroeconomic Research, Bulltick.