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Russia-Ukraine War and the Global Crisis: Cross-Country Impact Analysis on Poverty and Food Security

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Russia-Ukraine War and the Global Crisis: Cross-Country Impact Analysis on Poverty and Food Security

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Presented by Xinshen Diao, Paul Dorosh, and James Thurlow, all with the International Food Policy Research Institute, Washington DC. This is part of the Global Crisis Country Series.

Presented by Xinshen Diao, Paul Dorosh, and James Thurlow, all with the International Food Policy Research Institute, Washington DC. This is part of the Global Crisis Country Series.

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Russia-Ukraine War and the Global Crisis: Cross-Country Impact Analysis on Poverty and Food Security

  1. 1. Results: 22 August 2022 Russia-Ukraine War and the Global Crisis Cross-Country Impact Analysis on Poverty and Food Security Xinshen Diao, Paul Dorosh, and James Thurlow International Food Policy Research Institute, Washington DC The cross-country analysis is based on the 19 country case studies conducted by IFPRI with financial support from BMGF, FCDO, and USAID. All country studies use data and models developed with ongoing support from BMGF, USAID, and funders of CGIAR’s Foresight and Metrics and National Policies and Strategies Initiatives. The Bangladesh, Nepal, and Cambodia case studies benefited from working with IFPRI’s South Asia Office. The Egypt, Ethiopia, Ghana, Kenya, Myanmar, Malawi, Nigeria, and Rwanda case studies benefited from working with IFPRI’s country strategy support programs in the countries and with national partners. Xinshen Diao (x.diao@cgiar.org) | Paul Dorosh (p.dorosh@cgiar.org) | James Thurlow (j.thurlow@cgiar.org)
  2. 2. Results: August 22, 2022 Overview Phase 1: Impact analysis • Use country models to assess the impacts of global shocks on economies and populations Phase 2: Policy response analysis • Compare the effectiveness of broad policy responses by governments and their development partners Phase 3: In-depth analysis with partners • Tailor scenarios to policy and investment options Bangladesh Cambodia DRC Egypt Ethiopia Ghana Kenya Mali Malawi Myanmar Niger Nigeria Nepal Philippines Rwanda Senegal Tanzania Uganda Zambia 19 countries completed in phase 1
  3. 3. Results: August 22, 2022 19% -7% 113% 68% 44% 102% 106% 27% 5% 125% 50% Maize Rice Wheat Palm oil Crude oil Natural gas Fertilizers Change in nominal world prices (June 2021 to April/July 2022) Jun 2021 - Jan 2022 Jan 2022 - Apr 2022 Jun 2021 - Apr 2022 Jun 2021 - Jul 2022 Shocks, Impacts and Outcomes Shocks accounted for in the analysis Determinants of impacts Outcomes reported • Economy: National and agri-food system GDP • Population: Household incomes, poverty, and food security (i.e., hunger and diet quality) • What is the share of the affected commodities in total trade? • How important are imports in local markets and across supply chains? • Are commodities a large part of consumer baskets? • How much fertilizer was used before the crisis, and how sensitive is fertilizer demand to rising prices? • Peak changes in world prices for food, fuels and fertilizers (i.e., June 2021 to April 2022 | note that food and fertilizer prices in July 2022 were at pre-war levels, but still higher than in mid-2021) • Effect of higher fertilizer prices on fertilizer use in the current cropping season (≈ 1-year time horizon)
  4. 4. Results: August 22, 2022 Economy | Agri-Food Systems Adversely Affected • Size of economic impacts vary widely • Total GDP falls modestly in most countries but remains largely unchanged in some cases (e.g., Egypt) • Agri-food system GDP generally falls more than total GDP • Drivers of economic losses differ across sectors: • Rising world fuel prices are (typically) the main contributor to falling national GDP • Fuel imports are often countries’ largest import • Increase trade and transport costs for all products • Higher fertilizer prices and falling fertilizer demand drive most agri-food system GDP losses • Raises production costs and reduces productivity • World food price changes also have larger implications for agri-food system GDP Impact of world price changes on national and agri-food GDP (%) -0.3% -1.1% -0.4% 0.0% -1.0% -0.5% -0.8% -0.6% -1.4% -3.5% -0.3% -0.5% -0.9% -0.5% -2.5% -0.7% -1.3% -0.2% -0.8% Bangladesh Cambodia DRC Egypt Ethiopia Ghana Kenya Mali Malawi Myanmar Niger Nigeria Nepal Philippines Rwanda Senegal Tanzania Uganda Zambia National GDP Food prices Fertilizer prices Fuel prices -2.3% -2.0% -1.5% -0.7% -1.2% -1.3% -1.0% -0.9% -1.1% -4.1% -0.4% -0.8% -0.6% -1.5% -4.2% -0.6% -0.8% 0.0% -0.4% Bangladesh Cambodia DRC Egypt Ethiopia Ghana Kenya Mali Malawi Myanmar Niger Nigeria Nepal Philippines Rwanda Senegal Tanzania Uganda Zambia Agri-food system GDP Food prices Fertilizer prices Fuel prices
  5. 5. Results: August 22, 2022 Incomes | Large Impacts on Households • Household consumption (proxy for income) falls by more than GDP • Households are hit twice: rising consumer prices and falling incomes • Food expenditure accounts for a much larger share of household consumption than food production accounts for GDP • Consumption falls for both rural and urban households • Higher fertilizer prices affect rural households more, by reducing agricultural production/incomes • Fuel prices affect nonagricultural sectors and urban households more Impact of world price changes on household consumption (%) Contribution of world price changes to average changes in household consumption (%) Note: Unweighted average across countries 20% 30% 50% All households 17% 39% 44% Rural households 23% 18% 59% Urban households Food prices Fertilizer prices Fuel prices -4.7% -4.3% -2.6% -0.9% -3.1% -1.2% -2.6% -4.3% -5.8% -9.8% -1.2% -1.7% -3.9% -2.7% -6.0% -4.2% -3.3% -1.2% -2.4% Bangladesh Cambodia DRC Egypt Ethiopia Ghana Kenya Mali Malawi Myanmar Niger Nigeria Nepal Philippines Rwanda Senegal Tanzania Uganda Zambia Food prices Fertilizer prices Fuel prices
  6. 6. Results: August 22, 2022 72% 28% National 3.3% 2.4% 1.3% 1.8% 3.2% 0.6% 2.6% 3.3% 2.4% 7.6% 0.9% 0.9% 4.5% 2.3% 3.8% 2.6% 2.1% 0.9% 0.9% Bangladesh Cambodia DRC Egypt Ethiopia Ghana Kenya Mali Malawi Myanmar Niger Nigeria Nepal Philippines Rwanda Senegal Tanzania Uganda Zambia Food prices Fertilizer prices Fuel prices Poverty | Poor Population Expands • Poverty increases in all countries ($1.90 a day poverty line) • Additional 27.2 million poor people across the 19 countries • Most people falling into poverty are in rural areas (i.e., 72%) • Rural populations are larger than urban populations • Larger increase in rural poverty headcount rate (i.e., average 2.4 vs. 1.6 %-points) • Higher fertilizer prices drive most of the increase in rural poverty, whereas rising fuel prices drive urban poverty Impact of world price changes on national poverty headcount rate (%-point) Contribution of world price changes to increase in rural or urban poor population (1000s people) Urban Increase in poor population Note: Unweighted average across countries Rural 7,358 9,798 10,034 National 4,962 7,978 6,739 Rural 2,462 1,780 3,268 Urban Food prices Fertilizer prices Fuel prices Increase in poor population (1000s) 1,783 1,272 2,441 485 419 1,241 388 159 209 390 1,118 1,832 3,568 153 1,411 702 442 5,078 4,100
  7. 7. Results: August 22, 2022 66% 34% National 3.2% 1.3% 1.2% 1.8% 2.1% 0.3% 2.0% 1.2% 2.5% 2.0% 0.4% 1.9% 1.5% 1.4% 4.4% 0.7% 1.9% 1.1% 0.9% Bangladesh Cambodia DRC Egypt Ethiopia Ghana Kenya Mali Malawi Myanmar Niger Nigeria Nepal Philippines Rwanda Senegal Tanzania Uganda Zambia Food prices Fertilizer prices Fuel prices Food Security | Hunger Becomes More Pervasive • Number of undernourished people rises in all countries • Additional 22.2 million undernourished people across the 19 countries • Rising food prices are far more important in driving undernourishment than there are in causing the increase in poverty • Food prices are the largest driver of rising undernourishment in urban areas • Fertilizer prices are equally important for poverty and hunger, but this is due to rural areas, where they cause farm incomes and consumption to fall Impact of world price changes on prevalence of undernourishment (%-point) Note: Unweighted average across countries Contribution of world price changes to increase in rural or urban undernourished population (1000s people) Urban Increase in undernourished population Rural Note: Calibrated to FAO’s 2019 PoU indicator Increase in undernourished population (1000s) 3,906 427 1,462 555 108 1,126 492 157 97 214 1,048 1,901 2,309 75 1,076 250 456 5,288 1,313 6,007 6,471 2,292 Rural 5,104 1,509 879 Urban Food prices Fertilizer prices Fuel prices 11,108 7,988 3,166 National
  8. 8. Results: August 22, 2022 70% 30% National 7.5% 3.3% 1.3% 13.0% 1.7% 0.9% 3.0% 0.2% 0.4% 11.8% 0.7% 4.5% 6.1% 0.6% 3.8% 5.5% 1.6% 0.2% 0.3% Bangladesh Cambodia DRC Egypt Ethiopia Ghana Kenya Mali Malawi Myanmar Niger Nigeria Nepal Philippines Rwanda Senegal Tanzania Uganda Zambia Food prices Fertilizer prices Fuel prices Food Security | Diet Quality Deteriorates • “Diet quality” is based on whether a household’s consumption meets the recommended levels for six major food groups (i.e., EAT-Lancet) • World price shocks cause diet quality to worsen for lower-income households (i.e., people in bottom three income quintiles become deprived in at least one more food group) • 50.4 million people across the 19 countries • Smaller impacts in lower-income countries, where diets quality was already low • Higher food prices drive most of the deterioration in diets • Higher edible oil and cereal prices increase the cost of a healthy diet Lower-income population with worsening diets – now deprived in at least one additional food group (%) Note: Unweighted average across countries Contribution of world price changes to increase in rural or urban diet deprivation (1000s people) Urban Increase in population with deteriorating diets Rural 25,526 7,493 2,335 Rural 12,790 1,602 687 Urban Food prices Fertilizer prices Fuel prices 38,265 9,127 3,042 National Population with deteriorating diets (1000s) 8,350 1,730 589 476 881 912 72 45 178 533 1,159 13,510 1,915 273 1,641 49 72 11,700 6,348
  9. 9. Results: August 22, 2022 Moving to Policy Response • Phase 1 • A few more developing countries being added • Validating/revising with IFPRI country programs and partners • Phase 2 • Engaging governments and other partners on potential policy responses (e.g., food tax relief, fertilizer subsidies, fertilizer use efficiency, fertilizer supply chain development, social protection, etc.) • Learning so far • Focus work on policy responses in countries that are most vulnerable (e.g., large increases in poor population, higher fertilizer use, dependence on wheat and edible oil imports, etc.) • Food and fertilizer shocks are most important for poverty and food security, but their relative importance varies and, thus, so should country policy responses • Need to better identify the most affected populations, to ensure they are covered by policy responses (e.g., fertilizer use was already low amongst the poorest farmers) Combined impacts across the 19 countries Poor population increases by 27 million people Undernourished population increases by 22 million people Diet quality deteriorates for 50 million lower- income people 7,358 9,798 10,034 Food prices Fertilizer prices Fuel prices 11,108 7,988 3,166 38,265 9,127 3,042
  10. 10. Results: Aug 22, 2022 Acknowledgements Funding: This research and seminar were made possible through support provided by the Office of Policy, Analysis and Engagement, Bureau for Resilience and Food Security, U.S. Agency for International Development (USAID), under the terms of the Strengthen Evidence-based Policy Making in Africa, Asia, Latin America and the Caribbean (IFPRI/ReSAKSS) Award # AID-BFS- I0-17-00001 and the Policy, Evidence, Analytics, Research and Learning (PEARL) Award# 720RFS22IO00003. Joint funding was also received from the Bill and Melinda Gates Foundation (BMGF), the United Kingdom’s Foreign, Commonwealth and Development Office (FCDO), and the donor group funding the CGIAR’s Foresight and Metrics, and National Policies and Strategies initiatives. The opinions expressed in this seminar are those of the author(s) and do not necessarily reflect the views of BMGF, CGIAR, FCDO or USAID. Country researchers: • Kibrom Abay (Egypt) • Fadi Abdelradi (Egypt) • Kwaw Andam (Nigeria) • Seth Asante (Ghana) • Gilberthe Benimana (Rwanda) • Clemens Breisinger (Egypt, Kenya) • Antony Chapoto (Zambia) • Barun Deb Pal (India) • Jan Duchoslav (Malawi) • Mia Ellis (Cambodia, Nepal, Tanzania, Uganda, Zambia) • Mekamu Kedir Jemal (Ethiopia) • Kristi Mahrt (Myanmar) • Juneweenex Mbuthia (Kenya) • Bart Minten (Myanmar) • Serge Mugabo (Rwanda) • Edwin Ombui Oseko (Kenya) • Lensa Omune (Kenya) • Karl Pauw (Cambodia, D.R. Congo, Egypt, Ghana, Malawi, Myanmar, Philippines, Tanzania, Uganda, Zambia) • Josee Randriamamonjy (D.R. Congo, Egypt, Mali, Myanmar, Niger, Senegal) • Pranav Patil (Ghana) • Angga Pradesha (Kenya, Nigeria, Philippines) • Mariam Raouf (Egypt) • Gracie Rosenbach (Rwanda) • Jenny Smart (Bangladesh, Cambodia, Ethiopia, Ghana, Kenya, Malawi, Mali, Myanmar, Nepal, Niger, Rwanda, Senegal, Tanzania, Uganda, Zambia) • David Spielman (Rwanda) • Mitelo Subakanya (Zambia) • Alemayehu Seyoum Taffesse (Ethiopia) • Hiroyuki Takeshima (Nepal) • John Ulimwengu (D.R. Congo)

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