Higher agricultural input and food costs due to the Russian invasion of Ukraine will affect farmers and consumers everywhere this year, according to the Economic and Social Research Institute (ESRI).
In its latest quarterly economic bulletin, the think-tank has said that inflation could peak at 8.5% this summer, with an average rate of 6.7% for 2022. This would be the highest annual inflation rate since the mid-1980s.
The ESRI has also revised downwards its forecast for economic growth this year to 6.2%, because of the war in Ukraine.
ESRI report
The ESRI bulletin stated that a further acceleration of energy price inflation is likely due to the conflict in Ukraine. Russia accounts for 67% of Irish coal imports.
It added that there will be substantial increases in international grain prices as Russia and Ukraine are both key global exporters of wheat.
“This will disrupt global supply chains and inevitably feed into higher food prices,” the report outlines.
The ESRI said that Irish energy and agricultural imports are “disproportionately dependent on trade with Russia” and “will likely experience price increases as a result of the conflict”.
The report noted that 26% of Irish fertiliser imports come from Russia.
It outlined that a prolonging of military action in Ukraine will cause grain and fertiliser component prices to increase further.
“Higher input costs for the agricultural sector and increased food costs will affect farmers and consumers everywhere.
“Particular sectors of the economy may also require support to deal with the inflationary pressures; for example the agricultural sector, which could be particularly important in dealing with potential shortages of cereal and grain,” the report stated.