Focus on inflation and food prices:

The Russian Federation’s invasion of Ukraine exacerbated already elevated food and energy prices due to supply chain disruptions and strong pent-up demand as the pandemic mobility restrictions eased (Figure 1).

The latest data as of 2022Q3 4 show that inflation has been accelerating in most of these countries (Figure 7), inching towards 15 percent in Samoa and Tonga. It crossed over 10 percent in Palau and Solomon Islands. Consumer prices have also been rising in Fiji, nearing 5 percent in September 2022. Key factors contributing to inflation have been food and transportation prices.

The unprecedented nature of the pandemic called for unprecedented public policy support in PICs. On average, the PICs spent about 13 percent of GDP between January 2020 and September 2021 on COVID-19 response measures.

Like growth, short-term inflation projections have also been revised substantially compared to the pre-invasion of Ukraine forecasts. High imported energy and food prices will translate into elevated consumer prices in most PICs. Inflation rates are expected to ease during 2023, from the highs of 2022, helped by declining outlook for international commodity prices as well as decreasing costs of international shipping. The highest inflation rates during 2023 inflation are predicted in Samoa (12 percent), Tonga (8.9 percent) and Palau (8.1), while the lowest rates are forecasted in Fiji and RMI, at around 2-3 percent.