Pricing decisions will need to account for more variables
Rising inflationary pressures will require MNCs to adopt a more flexible approach to their operations in 2022. MNCs will need to monitor inflationary pressures closely and evaluate any potential need to update compensation for their employees in markets with intensifying inflation. 2022 budgets will also need to be updated with revised cost assumptions, as operational costs will remain highly volatile throughout the year. Pricing decisions will need to account for more variables this year, and executives will have to closely monitor the impact of not only competitor price changes on their business, but also prices of complementary goods and availability of their, their competitors’, and complementary good providers’ products. MNCs should assume consumers will be paying more for basic needs, such as food, transportation, and utilities, and governments will need to direct resources toward ensuring critical energy and food supplies while spending more on subsidies; at the same time, businesses will also see basic operational costs rise significantly, potentially limiting their procurement, product renewal, or investment budgets.
Overview
Many MEA countries have begun to introduce bans on certain food products, grains, and oils in order to ensure domestic supplies and prevent even further inflationary pressures. Early action has been taken by countries that have high exposure to Russia and Ukraine as sources of such commodities. Yet, the export bans not only focus on products that have direct supply disruptions but have been implemented on a wider list of goods.
Lebanon has banned the exports of some fruit, vegetables, milled grain products, sugar, bread, and some types of alcohol.
Egypt has banned the exports of lentils, pasta, wheat, flour, and fava beans.
Algeria has banned the exports of sugar, pasta, oil, semolina, and wheat.
Turkey has banned and/or limited the exports of olive oil, beans, lentils, sunflower seeds and oil, soy oil, corn oil, cotton, and margarine among other products.
Nigeria is seeing increased calls for such bans to avoid food shortages.
Our View
Global food prices were already high, prior to Russia’s invasion of Ukraine, causing the MEA region to begin 2022 with elevated food inflation. The inflationary pressures have further intensified and will remain high into Q2 2022 due to the actual and perceived risks of disruption to the supplies of agriculture commodities from both Russia and Ukraine. The MENA region is the second-most exposed to global food supply chain disruptions, after CEE. SSA countries rank in the middle in a global comparison. Food items and the hospitality sector will see higher prices, complicating pricing decisions and demand planning for MNCs.
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