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Inflation round-up

The number of countries with double-digit inflation continues to shrink, but the downward trend is slowing and could be about to reverse. Our table below shows seven fewer high-inflation nations than our last round-up two months ago. Nine countries brought their annual inflation down into single figures, but Liberia and Zambia both rejoined the 10%+ club.

With Saudi Arabia and Russia agreeing to hydrocarbon production cuts and the United States unable to make up the shortfall (as it did last year), oil prices have surged above USD95/barrel. Higher oil costs mean higher petrol prices, of course, but they also have a wider knock-on effect across economies. Indeed, US inflation, which had fallen fast in recent months, jumped back higher in August, mainly because of petrol (gas) prices. In the United Kingdom too, a winter of discontent has been predicted for fuel consumers - just as well that wages across the British economy grew faster than inflation at an average of 7.8% in the three months to July (although that in itself will keep inflation higher there).

Fortunately, as far as energy goes, natural gas prices remain considerably lower than the peaks they hit in 2022. However, many food costs are rising again. The combined effects of global heating and this year's El Niño on weather systems have damaged harvests across the world. Serious drought in Central America has even affected water levels in the Panama Canal, reducing shipping volumes and raising transportation costs. Various grains (partly because of the Ukraine war) and fruits are in short supply, while rice prices have hit a 12-year high - India's ban on rice exports has been a big driver of that. Food inflation fears are particularly acute in Asia, where diets are dominated by rice.

High-inflation countries (annual CPI 10%+)

Country CPI % Data month Trend IMF 2023 forecast %
Angola 13.5 Aug-23 ▲ Rising 11.7
Argentina 124.4 Aug-23 ▲ Rising 98.6
Azerbaijan 11.7 Aug-23 ▼ Falling 11.3
Burundi 28.8 Aug-23 ► Steady 16.0
Chad 12.5 Apr-23 ▲ Rising 3.4
Colombia 11.4 Aug-23 ► Steady 10.9
Comoros 20.2 Mar-23 ► Steady 8.1
Congo DR 26.7 May-23 ▲ Rising 10.8
Cuba 41.8 Jul-23 ► Steady n/a
Egypt 37.4 Aug-23 ▲ Rising 21.6
Ethiopia 28.2 Aug-23 ▼ Falling 31.4
Gambia 18.4 Jul-23 ► Steady 11.3
Ghana 40.1 Aug-23 ► Steady 45.4
Haiti 46.4 May-23 ► Steady 44.5
Hungary 16.4 Aug-23 ▼ Falling 17.7
Iran 39.8 Aug-23 ▼ Falling 42.5
Kazakhstan 13.1 Aug-23 ▼ Falling 14.8
Laos 25.9 Aug-23 ▼ Falling 15.1
Lebanon 251.5 Jul-23 ► Steady n/a
Liberia 12.4 Jun-23 ▲ Rising 6.9
Malawi 28.6 Aug-23 ► Steady 24.7
Mongolia 10.0 Aug-23 ▼ Falling 11.2
Nigeria 25.8 Aug-23 ▲ Rising 20.1
Pakistan 27.4 Aug-23 ▼ Falling 27.1
Poland 10.1 Aug-23 ▼ Falling 11.9
Rwanda 17.4 Aug-23 ▼ Falling 8.2
Serbia 11.5 Aug-23 ▼ Falling 12.2
Sierra Leone 45.0 Jul-23 ▲ Rising 37.8
Sudan 63.3 Feb-23 ▼ Falling 71.6
Surinam 56.6 Jul-23 ▼ Falling 42.7
Turkey 58.9 Aug-23 ▲ Rising 50.6
Turkmenistan 17.5 Dec-22 ▲ Rising 6.7
Venezuela 398.2 Jul-23 ▼ Falling 400.0
Zambia 10.8 Aug-23 ▲ Rising 8.9
Zimbabwe 77.2 Aug-23 ▼ Falling 172.2

Argentina, whose inflation has been in triple figures for several months now, is taking desperate measures to limit it, by setting price controls on both oil and grocery items. The trouble with price controls is that, if you don't allow suppliers to charge enough to meet their costs, they will stop supplying, making goods scarcer and raising inflationary pressures even higher.

One country recently enjoying some success in cutting inflation, Pakistan, seems likely to see indices go back up soon. Having reached an emergency funding deal with the International Monetary Fund, the government has been forced to cut subsidies. Electricity prices have doubled overnight as a result.

Another country, Turkey, which had recently seen inflation fall, is already seeing it leap higher once again. In July, when latest annual inflation was only 38.2%, the central bank warned that it might reach 58% by the end of the year. Well, it's already there, having jumped to 58.9% in August. The reason behind the re-soaring inflation is the weakness of the lira, a factor that will offset higher prices to at least some degree as far as expatriate cost of living is concerned.

When calculating cost of living adjustments for international assignees' pay, a comparison of home and host country conditions is always involved. So, when inflation trends are global, impacting most countries at the same time, rather than being confined to individual ones, expatriate remuneration challenges can be somewhat easier. That is largely the case at the moment, but with one big exception: China. So weak has China's economic recovery after reopening from Covid lockdowns been, that prices there are actually falling and the yuan has slumped. Bad news for China's economy, but it could also make things difficult for global mobility teams managing international staff in China, because cost of living indices have the potential to be significantly lower come ECA's September 2023 Cost of Living Survey (which will be published in November). And expats in China could see indices drop for several surveys to come because, as we have seen, inflation in the rest of the world seems unlikely to come down to China's level anytime soon. A stronger yuan would alter that prediction though.

Negative indices can be difficult to apply, because of a (misguided) perception among some expatriates that their pay is being cut. However, not to apply them can be costly for employers and cause problems later. If you need guidance on negative indices or any other aspects of global mobility, in China or elsewhere, do please get in touch.

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