WEF Warns of Cost of Living Crisis Despite Falling Inflation

Inflation and the cost of living crisis were among the major issues discussed here at the World Economic Forum (WEF) Annual Meeting 2023, as experts said the former might have passed its peak, while the later would continue in some countries.

RELATED:

Cooperation Under Spotlight at World Economic Forum in Davos

"The people who suffer most from inflation are ordinary citizens in any country," Vice President of the New Development Bank Leslie Maasdorp said, stressing that the world must conquer inflation and lower the burden of high essential goods prices for households.

"It (inflation and the cost of living crisis) is a tough topic to talk about, but I think it is a little easier to do so now than if we were having this conversation about six months back," Gita Gopinath, deputy managing director of the International Monetary Fund (IMF), said on Tuesday at a session of this year's WEF.

The headline inflation for the global economy peaked in 2022 and is likely to continue dropping this year. In October 2022, the IMF forecasted global inflation to decline to 6.5 percent in 2023 from 8.8 percent in 2022.

Although there are some grounds for optimism, many aspects of the global economic outlook remain gloomy, according to the WEF's survey. Gopinath warned that even if inflation drops, prices are still high, adding that "we don't have deflation. We have lower levels of inflation."

Unilever CEO Alan Jope echoed Gopinath's views, saying he is not particularly optimistic about easing the cost of living for households. The crisis will not be short-term, Jope said in Davos. "The people who are suffering the most will continue to suffer for quite a long time."

Gopinath called on countries to work together to seek multilateral solutions, especially regarding food and fertilizer exports and the supply of essentials.

Also at the meeting, Laura D'Andrea Tyson, professor of economics at the University of California, Berkeley, said that the cost of living crisis is not new and has been a living wage crisis for many people. She said that inflation in food, energy and housing has exacerbated what was a living wage or a poverty problem throughout the world.

The cost of living crisis disproportionately impacts those at the bottom of the pyramid, Jope said, encouraging business leaders to provide a fair living wage for their employees, calling it a strong financial incentive and an opportunity for businesses.