World food prices falling, and other economy stories you need to read this week

World food prices fell in January for a 10th consecutive month, and are now down 18% from the record high they hit last March following Russia's invasion of Ukraine, the United Nations food agency says. However, there are warnings that dozens of countries are still experiencing double-digit food inflation, leading to rising food insecurity and undernourishment.

The UN Food and Agriculture Organization's (FAO) price index, which tracks the most globally traded food commodities, averaged 131.2 points last month against 132.2 for December, putting it at its lowest since September 2021. Falls in the prices of vegetable oils, dairy and sugar helped pull down the index, while cereals and meat remained largely stable, the FAO said. The decline was helped in by an agreement in July to unblock Ukraine's grain exports, the UN says.

But the head of the FAO has issued a joint statement with the heads of the World Trade Organization (WTO), the International Monetary Fund (IMF), World Bank Group and UN World Food Programme saying that the world is still facing an unprecedented food and nutrition security crisis, and there needs to be an urgent response. They are calling for countries to avoid policies such as export restrictions, support trade facilitation measures to improve availability of food and fertilizer, and back trade finance initiatives.

Rising food prices have been one of the biggest contributors to inflation over the past year. The IMF says that average food price inflation since the start of 2021 exceeded the overall average rate of inflation for 2016-2020. "In other words, food inflation alone has eroded global living standards at the same rate as inflation of all consumption did in the five years immediately before the pandemic."

Countries have spent over $710 billion on social protection measures because of inflation in food, fertilizer and fuel prices, with $380 billion of this going on subsidies, the WTO, FAO, IMF and other organization heads say.

The US Department of Agriculture expects food prices to grow more slowly in 2023 than in 2022, but still at above historical average rates. The FAO says that early indications for 2023 point to a likely expansion of winter wheat cropping in the northern hemisphere. However, it warns that high fertilizer costs may impact yields.

Slumping energy revenues and soaring military expenditure pushed Russia's federal budget to a deficit of almost $25 billion in January. The country's monthly budget revenues from oil and gas fell by 46% on the year to $5.8 billion, putting them at their lowest since August 2020.

Moscow relies on income from oil and gas to fund its budget spending. Revenues totalled around $165 billion last year – that's an average of $13.8 billion per month, which is more than double what came in this January. This has prompted Russia to consider a one-off, voluntary windfall tax on big business of up to $3.5 billion to make up some of the shortfall, Reuters reports. The finance ministry said last week that it is trebling its daily sales of foreign currency to cover the deficit.

Russia's overall budget revenues for January were down by 35.1% on the year, but its budget spending was 58.7% higher. January's deficit already stands at 60% of the whole year's plan of around $40 billion, and analysts expect the shortfall to widen to more than $68 billion if current conditions persist.

The country's export-dependent economy has been withstanding the impact of Western sanctions over the war in Ukraine better than first expected, but still suffered a GDP contraction of around 2.5% last year. Consumer demand contracted at its fastest pace in seven years in 2022 and real disposable incomes fell, according to preliminary data from the Rosstat federal statistics service.

The US Federal Reserve says it may need to raise interest rates further in its efforts to cool inflation. "If we continue to get, for example, strong labor market reports or higher, higher inflation reports, it may well be the case we have to do more," Fed Chair Jerome Powell said. A federal funds rate of between 5.00% and 5.25% "seems a very reasonable view", according to New York Fed President John Williams.

Rating agency Fitch has raised its forecast for China's economic growth in 2023 to 5.0% from 4.1%, as consumption and broader activity are recovering faster than initially anticipated after the end of the "zero-COVID" regime.

Pakistan and the IMF are still discussing a $1.1 billion bailout deal. The heavily indebted nation only has enough foreign reserves to cover less than three weeks of crucial imports. It is still reeling from devastating floods last year, with the government estimating the rebuilding costs at $16 billion.

India's central bank has indicated it could continue its monetary policy tightening for longer than expected, because core inflation remains high. Most analysts had expected this week's 0.25 percentage point rise to be the final hike for the key lending rate, which has risen from 4% last May to 6.5% now.

Japan's real wages rose in December for the first time since March despite rising inflation, as nominal pay grew at the fastest pace in nearly 26 years thanks to robust winter bonuses. The market closely watches wage trends in the world's third largest economy, as high pay growth to counter price increases is seen as a crucial condition for the Bank of Japan to scale back its ultra-loose monetary policy.

German inflation slowed to 9.2% in January from 9.6% in December, putting it at its lowest level in five months, as government aid helped households cope with soaring energy costs.

Australia has raised its interest rates to 3.35%, their highest level in a decade. It was the ninth hike of the current cycle and the country's central bank says further rate hikes would be needed to bring inflation down from a 33-year high.

Growth in Saudi Arabia's non-oil business activity accelerated in January. Flash estimates for fourth-quarter GDP growth from the country's statistics agency show non-oil sector growth of 6.2%, outperforming broader economic growth of 5.4%. This would make Saudi Arabia the fastest-growing economy in the G20.

Britain has narrowly avoided a recession, after its economy showed zero growth in the final three months of 2022. GDP contracted sharply in December, and the country faces tough prospects in 2023 as households continue to wrestle with double-digit inflation.

And Britain is pressing on with work on a possible digital pound that could be in use by the second half of this decade. Given the declining use of cash, a digital currency is seen as a way to help prevent the fragmentation of an electronic cash system dominated by tech or banking giants.

Argentina is rolling out a new 2,000-peso bill, doubling the value of the country's top-denomination banknote as it battles inflation of 95%. The note will be worth $11 officially and $5 in commonly used parallel markets.

Argentina and Brazil recently floated the idea of creating a new common currency to boost trade, but the idea was met with scepticism from many economists. World Economic Forum Digital Editor Spencer Feingold explains why.

There are glimmers of economic hope as we begin 2023, but where are they coming from. The World Economic Forum’s Chief Economists Outlook 2023 and the IMF's growth forecasts highlight three main themes.

Countries affected by conflict are at high risk in this era of economic uncertainty. Consensus is growing that international financial institutions should play a key role in stabilizing these economies, and the IMF has set up a series of programmes to help.