Rising Food Costs Threaten Economic Gains for Low-Income EU Households, Says Report

A recent World Bank Policy Research Working Paper, prepared by experts from the Poverty and Equity Global Practice, the World Bank, and the University of Oslo, delivers a stark warning: soaring food prices are threatening to unravel recent economic progress in Eastern European Union countries, especially Bulgaria, Croatia, Poland, and Romania. Authored by Monica Robayo-Abril, Leonardo Lucchetti, Lukas Delgado-Prieto, and Reena Badiani-Magnusson, the report outlines the severe impact of post-pandemic inflation, emphasizing the disproportionate burden on low-income households. The researchers highlight that the current wave of food inflation risks entrenching poverty, worsening food insecurity, and exacerbating income inequality unless swift and targeted policy action is taken.

A Cost-of-Living Crisis Deepens for the Poor

Since 2021, inflation has surged across the EU, with food prices leading the rise. By early 2025, food prices had increased by about 33% across the EU, compared to a 23.3% rise in overall consumer prices. In the four countries under review, inflation was even more pronounced, with food and non-alcoholic beverage prices climbing over 43%. Romania recorded the steepest rise, with a 37.9% increase in overall prices. These trends have struck low-income households the hardest. In Romania, the poorest 10% of households allocated around 51% of their total expenditure to food in 2019, while in Poland, the figure stood at 38%. In contrast, the richest households in those countries spent just 25% and 13% of their budgets on food, respectively. Such disparities have made the poor particularly vulnerable to food price shocks, rapidly eroding their purchasing power.

Households on the Edge: Coping Mechanisms Fray

With inflation showing little sign of abating, low-income households have resorted to a range of coping strategies, but the pressure is mounting. Many families are buying fewer goods, switching to cheaper brands, postponing necessary purchases, and relying on promotional discounts. Despite these efforts, financial stress is intensifying. In Romania, the proportion of households unable to make ends meet leapt from 37% in spring 2021 to 63% in summer 2022. Bulgaria, Croatia, and Poland reported similarly sharp increases in economic hardship. Even more concerning is the rising number of people unable to afford a proper meal every other day, a key indicator of food insecurity and material deprivation. In Bulgaria and Romania, this indicator has consistently exceeded the EU-27 average, with the poorest households suffering the greatest nutritional shortfalls.

Patchy Social Assistance Leaves Millions Exposed

The World Bank report finds that while all four countries operate social assistance programs, these schemes are failing to fully protect the most vulnerable. In Poland, only 8.6% of the poorest households receive social assistance, compared to 30.5% in Bulgaria. Benefit amounts are also modest: in Poland, they account for just 1.6% of income for the poorest households, while in Croatia, the figure is 4.4%. Coverage is limited and benefit levels are often outdated. For instance, Romania has legal mechanisms to index benefits to inflation, but these are inconsistently applied. Poland updates eligibility thresholds only every three years, undermining the ability of low-income households to access timely support. The simulations show that with a 20% rise in food prices, between 23% and 28% of Romania’s “new poor” would not be covered by existing programs. Similar gaps are evident in the other countries.

Simulating the Future: Who Will Be Left Behind?

The authors employ microsimulations to assess how food price shocks affect poverty, inequality, and household welfare. A 20% food price hike is projected to raise poverty rates by 0.3 to 1.1 percentage points, depending on the country. A 40% price increase could push Romania’s poverty rate up by nearly 3 percentage points. Households with unemployed members, children, or more than five members are the most affected. These groups see dramatic welfare losses, with income inequality increasing across the board. The Gini coefficient rises significantly under all shock scenarios, reflecting regressive impacts that hit the poor much harder than the affluent. Notably, the poorest 10% face income losses of 7–10%, while the top 10% experience losses of just 2–5%.

Targeted Relief Can Work but Needs to Go Further

To explore potential solutions, the authors simulate the effects of expanding social assistance. Increasing benefit levels by 50% for existing recipients would provide some relief, especially for households in the bottom income decile. In Croatia, which has the most generous benefits, the impact is particularly notable. However, this approach has limits: it fails to reach many of the newly poor, and most of the benefits remain concentrated among those already covered. The authors argue that expanding coverage, not just benefit size, is essential to contain the rise in poverty and inequality. Yet this expansion comes with fiscal trade-offs. Depending on the scenario, increasing support could cost between 0.04% and 0.08% of GDP, relatively small but potentially challenging for countries with tight budgets.

The World Bank’s findings point to a stark reality: soaring food prices are undermining the livelihoods of millions in Eastern Europe, deepening poverty, and stretching social systems to their limits. Governments must act decisively to expand and reform safety nets, ensure regular indexation of benefits, and build resilient policies that can respond swiftly to inflationary shocks. Without targeted interventions, the human and economic cost of this crisis will continue to mount, eroding the progress achieved over the last decade.