Oil effect – food prices during the pandemic

As the Coronavirus pandemic started, economic downfall made society face threat of unemployment and loss of incomes. Drastic decrease of incomes is directly connected to purchasing capacities and considering tendency of growing prices on food products, the picture is not that pleasant. It’s a fact, that this situation hits low income families the most who spend the majority of their incomes on food.

When compared to the previous year, prices on food globally increased by 14% in 2021 (World Bank, Food Price Index 2021), Georgia did not fall behind this negative tendency. In April of the current year, ACT got interested in the impact of increased prices and inquired respondents on the dynamics of costs spent on food and frequency of using different products over the past 6 months.

Growth rates 

In the spring time, social media was overflowed by record growth of oil price and this became a popular topic for discussions or jokes. Even though the price of oil reached its historic maximum price since 2008, unfortunately, oil was not the only main character in this story and the pandemic appeared to be pushing prices up and up on food products. Based on National Statistics Office of Georgia, prices in food category went up by 0.3% in April compared to the previous month which was reflected in 0.1% growth in 7.2% inflation rate. In good categories, prices of fruit and oil, fish and sweets showed the biggest growth rate:  

The majority of 401 respondents we inquired, confirmed drastic increase of prices and declared that they have to spend more and more on food recently. If we look at data in age perspective, the picture is similar for all age groups – the majority of respondents (averagely 75%) in 18-34, 35-54 and 55+ age groups report on noticeable growth of prices in food category over the past 6 months.

According to the study results, the most frequently used products (everyday, several times a week) include bread and bakery, vegetables, fruit, dairy products and sweets for the majority of respondents. Relatively less frequently consumed products are frozen and canned meals, fish and oil, butter, sugar and cheese. If we compare this list to the dynamics of prices provided by GeoStat, we’ll see that most frequently used food products are now more expensive. The products listed below take the majority of space in consumer basket according to frequency of use.

Impact of the shock

To sum up briefly, the pandemic and its negative effects on the economy was not unexpected – breach in food supply chain and delaying processes logically follow similar crisis. The Coronavirus pandemic caused delays in functioning of global food value chains, which affected every phase of food supply. This all originated from the restrictions and regulations set in forth by governments of different countries.

For now, food prices have to cope with the shock caused by the pandemic. Prices increase from month to month, as well as annually. Even though developing, food importer countries are number one target for price growth caused by the pandemic, however, in import-depended Georgia where other external economic factors are actively making impact, including depreciation of the national currency, growth of prices on food products is even more evident and noticeable.