Inflation round-up

Inflation in Iran has been rising sharply since the middle of last year when the United States abandoned the 2015 nuclear deal and reimposed sanctions on Tehran. Renewed prohibitions on Iranian oil sales caused the rial to plummet and hard currencies and imports to be subject to increasingly short supply in the country. Now, the annual change in the consumer price index has topped 50% for the first time since 1995, with food prices alone jumping 85% year-on-year. As our table of high-inflation countries below shows, the International Monetary Fund expects Iran's inflation to slow later in the year (its forecast for 2020 is 31%), but with Donald Trump having recently ended waivers enabling some countries to buy oil from Iran, effectively taking more supply out of the market, global oil prices have risen above USD70/barrel again, pushing inflationary pressures up around the world.

Inflation continues to rise in Argentina too, but this month provided some hope that indices might fall soon. Although the annualised CPI for April, at 55.8%, was again higher than the previous month (54.7%), the increase was at a slower rate and the month-on-month figure actually fell for the first time this year. The improvement was mainly due to the government's price freezes on 60-plus items introduced in April.

Zimbabwe's inflation, now at 66.8%, is unlikely to stop rising any time soon, as a serious drought has increased the need for imported food. The price of bread was reported to have doubled in a week in April. While the cash-strapped government announced it would subsidise public transport in an effort to reduce cost-of-living pressures, it also said it would have to increase fuel duties.

Egypt has been able to reduce inflation in recent months, but the downward trend has now stalled at a still-high level and is likely to reverse after the government announced it would remove the last of its subsidies on fuel in June 2019 (as part of a funding agreement with the IMF). The move will push prices for various energy products up significantly.

In China, an epidemic of swine fever has killed millions of pigs and pushed pork prices, which carry a high weighting in the calculation of Chinese food-price inflation, up considerably. The impact is likely to be felt across Asia and beyond.

The developed world isn't immune to sharp price rises either, as the United Kingdom showed in March, when it recorded its highest food-price inflation in six years, due to a combination of factors, both domestic and global.

Pakistan's government, which is struggling with huge debts, has been forced to hike fuel prices to boost its revenues. The decision will lift inflation, which is already rising fast (as our watch list below shows), even further. The IMF has agreed a loan to help stabilise public finances, but it is also pushing for the central bank of Pakistan (which raised interest rates in May) to fully float the rupee. If that happens, it could cause a more rapid decline in the currency's value, at least temporarily, and further upward pressure on import prices.

Finally, in 2017 six Gulf states were supposed to introduce 5% VAT all at the same time, but only Saudi Arabia and United Arab Emirates achieved this. Bahrain followed in January 2019. Oman plans to complete its VAT reform in October 2019, while Qatar is expected to do so in January 2020. However, the last of the states, Kuwait, has now announced that it won't be ready to introduce VAT until June 2021!