Increasing price pressures set the tone from the beginning of 2022, due to a confluence of factors that would ultimately push inflation to generational highs. The reopening of economies after the lifting of pandemic lockdowns caused demand to bounce back more rapidly than supply, which itself was stymied by a number of backlogs, including shortages of anything from staff to container vessels. The Russo-Ukrainian War resulted in global oil and food prices, which were already on an uptrend at the beginning of the year, reaching levels last seen around a decade ago.

The escalating cost-of-living crisis forced major central banks to act, albeit belatedly, with most - including the European Central Bank and the US Federal Reserve (the Fed) -implementing sizeable interest rate hikes. However, the jury is still out on how far central banks will have to go to get inflation to more palatable levels.

The aggressive Fed action resulted in rising US Treasury yields and a resurgent US dollar, which slammed emerging market countries twice: by triggering investor outflows (raising funding costs) and weakening their currencies (raising import costs). This series of unfortunate events could not have come at a worse time for emerging markets, especially African countries still recovering from the pandemic.

Rising global food prices were exacerbated by weather-related shocks to local agricultural production, such as drought in the Horn of Africa and floods in West Africa. Crucially, limited fiscal space meant that governments could do very little to shield their populations from higher costs.