‘Inflation In the Euro-Mediterranean Area’

Marseille, 25-26 October 2022

CONTEXT

Banque de France, the Center for Mediterranean Integration and the World Bank Group jointly organized the 2022 edition of the Euromed Workshop on the topic of ‘Inflation in the Euro-Mediterranean Area’. The objective of this closed-door event was to facilitate high-level policy dialogue between Euro-Mediterranean countries with differing economic structures and financial systems, concentrating on inflation. The event was held on 25 to 26 October 2022 in Marseille.

PARTICIPANTS AND OBJECTIVES

Participants from central banks across the Eurozone, southeast Europe, the Middle East and North Africa, together with representatives from international and regional economic organizations, discussed main inflation trends across the area. Participants took stock of the inflation situation in the countries of the Euro-Mediterranean area and shared views on measurements and forecasts issues as well as policies aimed at effectively mitigating the impact of inflation on households, on companies and on the financial sector.

MAIN TAKEAWAYS

Several indexes and data used to measure inflation in the different Central Banks were presented. All participants specified that energy and food prices were the main components of recent headline inflation hikes mostly due to the war in Ukraine, post-Covid effects and disruptions in global supply chains. Another key point was the question of which data and methodology to use to forecast inflation as effectively as possible given the recent experience of large errors on forecasting inflation by the markets, central bankers and international institutions.

The workshop also brought attention to the social impact of rising food and energy prices on households and SMEs highlighting the need for more food and energy security in some countries, also in the light of growing income inequality. Participants discussed monetary policy as well as budgetary and fiscal measures, highlighting the goal of inflation reduction on one hand, and the need to provide comprehensive measures that can support the most vulnerable on the other hand.

The workshop also discussed current outlook and vulnerabilities of the corporate and the financial sector, including the deterioration of funding conditions and the potential increase of the sovereign bank nexus in some economies. The effect of inflation on financial stability was also pointed out. The workshop discussed interactions between climate change challenges and price stability. As participants highlighted economic disparities and potential diverging paths among countries in the Euro-Mediterranean area, they stressed that dialogue could contribute to address the challenges posed by inflation.