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Inflation round-up: surge in global oil prices

ECA International

Oil prices may not have as big an impact on inflation as they did in the 1970s, but they are still among the biggest influences. Oil remains a major input factor in production and transport and, when its cost rises, it usually has a sizeable knock-on effect on consumers' - and expatriates' - buying power.

Brent crude hit $69 a barrel yesterday, its highest since 2014 and 30% up from a year ago. That could produce a further surge in national inflation figures, the majority of which have been rising anyway, due mostly to improving domestic demand as economies finally recover from the global financial crisis. One statistic in particular shows how inflation around the world is rising: 18 months ago there were 43 countries recording deflation (falling prices); now, only six.

Whether the oil price continues the upward trend depends on various factors. The rise has stemmed from a combination of reduced supply and expanding demand, so a lot depends on output from volatile big oil producers, like Iran, production increases from shale industries (especially in the United States) and continuing improvement in the world economy.

There were no new additions to our high-inflation countries table this time. The biggest change relates to Venezuela, where the opposition-controlled National Assembly has just announced an annual 2017 inflation figure of 2616%, surpassing already the IMF's forecast for 2018 inflation, which we talked about in the last inflation round-up.

High-inflation countries (CPI 10%+)
Country CPI % Last reported Trend IMF 2018 forecast
Angola 27.6 Nov-17 ► Stable 20.6
Argentina 22.3 Nov-17 ► Stable 17.8
Azerbaijan 12.3 Oct-17 ▼ Falling 8.0
Burundi 17.5 Nov-17 ▼ Falling 20.2
DR Congo 61.9 Nov-17 ▼ Falling 44.0
Egypt 26.0 Nov-17 ▼ Falling 21.3
Ghana 11.8 Nov-17 ▼ Falling 9.0
Haiti 13.7 Nov-17 ▼ Falling 9.0
Liberia 13.1 Sep-17 ▲ Rising 9.9
Libya 25.7 Sep-17 ▼ Falling 32.1
Nigeria 16.3 Nov-17 ► Stable 14.8
Sierra Leone 16.9 Jul-17 ► Stable 10.6
South Sudan 101.9 Sep-17 ▼ Falling 45.0
Sudan 24.8 Nov-17 ▼ Falling 18.6
Surinam 10.8 Nov-17 ▼ Falling 9.3
Syria 43.2 Dec-16 ▼ Falling n/a
Turkey 13.0 Nov-17 ▲ Rising 9.3
Ukraine 13.6 Nov-17 ▼ Falling 10.0
Venezuela 2616.0 Dec-17 ▲ Rising 2349.3

In other inflation news, talking of energy prices, authorities in Sudan have recently announced they will be cutting electricity subsidies in the near future, in accordance with advice from the International Monetary Fund, with which Sudan is negotiating a loan agreement. A word of caution, though, because at the same time, the government said it would devalue the Sudanese pound in the first week of January, as we reported last week, but that move has failed to happen. Assuming it does at some point, expect inflation to soar significantly higher. As always, we'll keep you posted.

Coincidentally, there has been another declared currency devaluation, in Angola this time, which has also failed to occur as yet. Late last week, the central bank announced it had abandoned the kwanza's peg to the US dollar and replaced it with a looser trading band, with a view to reducing the difference between official (currently USD 1 / AOA 166) and black-market (USD 1 / AOA 435) exchange rates. So far, official rates have not budged, but in its defence the bank did at least say the change would be gradual. If it is brave enough to move the rate to anything close to the black-market one, then inflation could jump much higher.

Finally, here is this month's watch list, showing a particularly alarming jump in Ethiopia's inflation:

On watch! (notable rise in inflation, but below 10%)
Country Latest CPI Data month Up from
Ethiopia 9.7% Dec-17 4.5% Sep-17
Iran 9.6% Nov-17 8.4% Oct-17
Mongolia 6.2% Nov-17 3.3% Jul-17
Nicaragua 5.3% Nov-17 4.1% Sep-17
Sri Lanka 7.8% Nov-17 6.0% Aug-17
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