Food inflation during the Covid-19 pandemic. A comparison between Brazilian and Thai food inflation during the years 2020 and 2021.

Abstract

Thailand and Brazil are two prominent net agro-exporters, and both countries were hit severely by the Pandemic of Covid-19. While Thailand's GDP decreased by 6.1% in 2020, the Brazilian economy shrank by 4.1%. Despite these similarities, during the acute phase of the pandemic, food prices in Brazil started to increase at an accelerated pace while, in Thailand, food prices remained low and stable. In 2020, the annual food inflation in Brazil was 14,11%, and Thailand's was 1.37%. Therefore, this study aims to contribute to the literature by filling the information gap about food inflation dynamics in those two countries during the Covid-19 pandemic. The Autoregressive Distributed Lag methodology was applied to 13 potential explanatory variables: Food Imports, Food Exports, Interest Rate, a proxy for Monthly DGP (one for each country), Crude Oil Index, Crude Oil Price, Global Food Index, Exchange Rate, Nominal Effective Exchange Rate, Agricultural Price Index, Agricultural Production Index, and Energy Inflation. Out of these 13 variables, only the last six were statistically significant. The key reasons for the food inflation hike in Brazil were: i) the country has not taken advantage of the international crude oil slump to provide more aggressive discounts in domestic energy prices; ii) the production growth stagnation for some staple foods; iii) high pass-through from Agricultural Price Index to Consumer Price Index; and iv) large currency devaluation.