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Inflation round-up

In the chaotic times we're currently living in, it would take a brave person to predict where inflation rates will be in six months' time. Even the International Monetary Fund's forecasts for 2021 inflation (see first table) are, in the main, now looking decidedly adrift of reality. Indeed, media articles and official data sets are pointing in all directions.

Take Europe, for instance. In just a few weeks we've been alerted to big jumps in education, medical services, food, shipping, natural resources and bicycle costs, while at the same time fuel, air and rail tickets, entertainment and eating out have all plummeted in price. Debate continues to rage about what is more important for policymakers to address: persistently low/negative core price pressures or the possibility of a rapid rise in inflation overall.

When you add in global price factors, such as the slump in domestic demand caused by coronavirus restrictions almost everywhere, but also unprecedented injections of stimulus spending by numerous governments and big increases in the amounts of money circulating in many economies, the picture is even less clear. With vaccines being rolled out, we may be in for a swift economic recovery later in the year. Then again, new Covid variants seem to be appearing on an almost weekly basis and could set us back to square one. You'll forgive me for shying away from making any predictions of my own...

However, for global mobility (GM) teams trying to manage fair remuneration for their international assignees, the confused picture in Europe and elsewhere shows once again how vital it is that they can access appropriate, directly relevant information, rather than relying on media headlines, generalised data from national statistics offices or feedback from expatriate staff themselves. GM practitioners need to know what items assignees are likely to buy, where they are likely to buy them and in what quantities, as well as how the prices of these items have changed during the pay review period, not only in host countries, but home countries as well. They may also need to be able to exclude certain items, which may be covered by separate allowances, or which may not be so relevant during a crisis like Covid-19 (transport costs are a good example). 

ECA's regular cost of living surveys provide all this and more, because they are specifically designed to reflect lifestyles and spending patterns of international assignees. Our multi-level research and review regime has proved robust during the pandemic (despite limited travel opportunities for our intrepid International Data Researchers) and continues to provide GM teams with the most comprehensive and relevant resources available, so they can protect standards of living of their charges abroad. So, if you need help to make your cost-of-living picture clearer, do please get in touch.

High-inflation countries (annual CPI 10%+)
Country CPI % Data month Trend IMF 2021 forecast %
Angola 24.9 Nov-20 ▲ Rising 20.6
Argentina 35.8 Nov-20 ▼ Falling n/a
D R Congo 20.1 Oct-20 ► Steady 12.1
Ethiopia 18.2 Dec-20 ▼ Falling 11.5
Ghana 10.5 Dec-20 ► Steady 8.7
Guinea 11.0 Aug-20 ► Steady 8.0
Haiti 21.6 Oct-20 ▼ Falling 23.8
Iran 44.8 Dec-20 ▲ Rising 30.0
Lebanon 133.5 Nov-20 ► Steady n/a
Liberia 14.8 Aug-20 ▲ Rising 9.5
Nigeria 15.5 Nov-20 ▲ Rising 12.7
Sierra Leone 10.6 Nov-20 ▼ Falling 15.5
South Sudan 11.5 Oct-20 ▼ Falling 33.1
Sudan 254.2 Nov-20 ▲ Rising 129.7
Surinam 54.4 Nov-20 ▲ Rising 51.0
Syria 34.5 Dec-19 Unknown n/a
Turkey 14.6 Dec-20 ▲ Rising 11.9
Turkmenistan 13.4 Dec-19 Unknown 6.0
Uzbekistan 11.2 Nov-20 ▼ Falling 10.7
Venezuela 4087.0 Nov-20 ▲ Rising 6500.0
Zambia 19.2 Dec-20 ▲ Rising 13.3
Zimbabwe 348.6 Dec-20 ▼ Falling 3.7

There were no newcomers to the table above this time. However, Sudan's inflation soars ever higher. Its government, a fragile coalition between the military and civilian leaders, is trying to quell renewed violence around the country, especially in Darfur, as well as social unrest sparked by worsening poverty and unemployment, partly due to Covid-19. The policy response has included big public-sector pay rises, but they have had to be funded through money printing, which is a potent inflationary factor and comes on top of recent import-price increases caused by the collapse of the currency's value. More positively, Sudan hopes for greater levels of foreign aid and investment now the United States has removed it from its 'sponsors of terrorism' list.

In our old friend Venezuela, meanwhile, inflation is - ominously! - rising again...

As we reported earlier in the month, Cuba enacted its planned currency reform, which effectively devalued the peso. However, higher import costs are not the only likely spur to inflation, because the government also ended fuel and other subsidies. Petrol prices have reportedly leapt by about 30%. The authorities only rarely report inflation rates, but they are expected to increase dramatically. Thankfully, ECA's next cost-of-living survey is never far away. 

Finally, here is our regular watch list:

On watch! (notable rise in inflation, but below 10%)

Country Latest CPI % Data month Up from
Burundi 9.0 Nov-20 7.0% Oct-20
Chad 5.5 Oct-20 3.0% Jun-20
Egypt 5.7 Nov-20 4.5% Oct-20
Guatemala 5.5 Nov-20 4.2% Aug-20
Kenya 5.6 Dec-20 4.2% Sep-20
Kyrgyzstan 8.2 Nov-20 7.2% Oct-20
Niger 5.7 Aug-20 2.6% Jun-20
Papua New Guinea 6.0 Jun-20 3.1% Mar-20
Saudi Arabia 5.8 Nov-20 0.5% Jun-20
Tajikistan 9.8 Nov-20 8.5% Oct-20

If you need guidance on remunerating international staff, please do get in touch.

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