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Inflation round-up

Throughout history, sudden jumps in prices of essential goods have caused social unrest. In the past, it was more likely to be food costs that sparked trouble for the authorities. So vital was the grain supply to social stability in ancient Rome, for instance, that wise emperors were said to insist on two things, bread and circuses, always being available and always being affordable.

Nowadays, in an age when technology has made us far more mobile, and we have structured our lives and environments around cars and public transport, it tends to be a sudden leap in fuel or travel prices that sends us over the edge, because our ability to get around, to work or shop or play, has essentially become a basic need. Fuel costs also feed into many other prices, so an increase can have a broad impact.

The last couple of years have produced numerous examples of fuel price rises igniting riots or other protests, mostly after cash-strapped governments have cut subsidies: Sudan (whose government fell and where bread prices were also an issue) and Jordan in late 2018; Zimbabwe, Ecuador and Egypt in 2019. Mass protests in Lebanon recently were sparked by a wider array of price rises, after the government (the prime minister was forced to resign) tried to raise VAT, while Argentina and Honduras have also seen protests stemming from higher prices. The gilets-jaunes movement, which paralysed parts of France sporadically for many months in 2018/19, was initially formed as a response to fuel tax increases, imposed in this case as a green measure to try to combat climate change. Last month, at least 15 people died in rioting sparked by a hike in subway/metro fares in Chile's capital, Santiago.

Now it seems to be Iran's turn.

Without wishing to equate the enormous hardships local people are facing in the countries mentioned above with the challenges international assignees, who tend to be paid very well, may be dealing with, significant inflation nevertheless can matter hugely to expats. This is especially true if the remuneration approach, by which their pay is calculated and its delivery structured, is not appropriate for the assignment or assignee in question.

Many international employees are paid using an approach which splits delivery of pay into home and host elements, often with the home expenditure part delivered in home currency. Others are paid entirely in home or another hard currency. These expats are protected to some degree from high inflation in their host locations, because significant price rises are often accompanied or caused by a big fall in the value of the host currency, more of which can thereafter be obtained in exchange for the same amount of home currency. So, the two cost of living factors offset each other to at least some degree.

However, many assignees are paid entirely in host currency, and even those who do receive split pay are likely to receive some host currency, and that money has no protection from rising prices. Expats, like everyone else, structure their lifestyles according to their means, so a sudden leap in costs, such as fuel prices, can cause genuine difficulties and loss of purchasing power. Adjustments to their pay may well be necessary.

A good remuneration system will ensure that over time expatriate staff have their standard of living protected. Assignees probably won't cause a riot if this doesn't happen, but global mobility teams certainly know how capable they are of raising the issue loudly and persistently if they feel they are out of pocket. If you need help in making sure that your pay approach is fit for purpose, please get in touch.

High-inflation countries (CPI 10%+)
Country CPI % Last reported Trend IMF 2020 forecast %
Angola 16.0 Sep-19 ▼ Falling 15.0
Argentina 53.5 Sep-19 ► Stable 50.1
Ethiopia 18.6 Oct-19 ▲ Rising 12.7
Haiti 18.6 Aug-19 ► Stable 17.1
Iran 35.0 Sep-19 ▼ Falling 31.0
Liberia 29.9 Jun-19 ▲ Rising 20.5
Myanmar 10.4 Aug-19 ▲ Rising 6.7
Nigeria 11.8 Sep-19 ► Stable 11.7
Pakistan 11.1 Oct-19 ► Stable 13.0
Sierra Leone 15.4 Aug-19 ▼ Falling 13.0
South Sudan 170.5 Oct-19 ▲ Rising 16.9
Sudan 53.5 Sep-19 ▲ Rising 62.1
Uzbekistan 14.3 Dec-18 ► Stable 14.1
Venezuela 39 113.8 Sep-19 ▼ Falling 500 000.0
Zambia 10.5 Sep-19 ▲ Rising 10.0
Zimbabwe 440.1 Oct-19 ▲ Rising 49.7

Despite the serious riots in Zimbabwe we mentioned earlier, which followed a fuel price hike in January, the Harare government raised them again at the end of October. Inflation continues to soar, as the table above shows, and is likely to keep rising, especially as the central bank has now halved interest rates in a desperate attempt to stimulate the economy. Use of the US dollar was banned in June and new Zimbabwean dollar notes were finally introduced, after long delay, last week, but they reportedly ran out rapidly and are unlikely to prevent the country sliding further into crisis.

Myanmar and Zambia both joined our high-inflation countries' table above this time, as our watch list (below) had predicted they might in recent months. Meanwhile, Barbados and Georgia were the newcomers to the watch list this time.

On watch! (notable rise in inflation, but below 10%)
Country Latest CPI % Data month Up from
Barbados 5.5 Aug-19 3.2% Jun-19
Gambia 7.6 Sep-19 6.1% Mar-19
Georgia 6.9 Oct-19 4.9% Aug-19
Moldova 6.8 Oct-19 5.5% Aug-19
Mongolia 8.9 Sep-19 7.6% Jul-19
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