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Inflation round-up

Following his latest election victory in Turkey, President Recep Tayyip Erdogan promised to take charge of the country's economic policy personally. He may already be regretting his boldness as new inflation figures have shown the limits of his control. Consumer price inflation leapt to 15.4% end-June, up from 12.1% in May and 10.9% in April. Indeed, rather than controlling inflation, Erdogan's policies have largely caused it. Excessive government spending and pressuring the central bank to increase lending and keep interest rates lower than they should be have all contributed to the lira's serious weakness of late. The currency has lost more than a third of its value against the euro in the last two years and 20% in 2018 alone. That has been the primary cause of rising inflation and, while all residents will be suffering from soaring prices, it has put a particular burden on international assignees working in Turkey, as they tend to buy a higher proportion of imported goods (which will have increased most in price). To bring the cost of living down, Erdogan will have to reverse many of his policies, which seems unlikely at present.

Inflation continues to rise in Liberia too. The country has suffered from shortages of hard currencies since United Nations peacekeepers ended their mission there two years ago. That has caused the local currency to plummet by nearly 50% against the euro since the beginning of 2017. The government has vowed to take steps to address the issue.

Iran, which attempted to unify its multiple exchange rates in April, is reported to have given up on the reform and has opened a secondary market for hard currencies for importers and exporters of non-essential items, effectively re-legitimising the open-market exchange rate it tried to ditch three months ago. However, because of the government's efforts, which have predictably increased shortages of hard currencies, the value of the rial has fallen sharply. Expect imported goods prices to increase significantly and official inflation to go back above 10% soon. For a long time ever-present on our high-inflation countries table, Iran only recently reduced its inflation to single figures.

High-inflation countries (CPI 10%+)
Country CPI % Last reported Trend IMF 2018 forecast
Angola 20.7 May-18 ▼ Falling 27.9
Argentina 26.3 May-18 ▲ Rising 22.7
DR Congo 31.7 May-18 ▼ Falling 25.9
Egypt 14.4 Jun-18 ▲ Rising 20.1
Ethiopia 14.7 Jun-18 ► Stable 11.2
Haiti 13.0 Apr-18 ▼ Falling 11.1
Liberia 21.4 Apr-18 ▲ Rising 11.7
Libya 12.1 Apr-18 ▼ Falling 24.3
Nigeria 12.1 May-18 ▼ Falling 14.0
Sierra Leone 15.1 Apr-18 ▼ Falling 13.9
South Sudan 161.2 Mar-18 ▲ Rising 104.1
Sudan 60.9 May-18 ▲ Rising 43.5
Turkey 15.4 Jun-18 ▲ Rising 11.4
Uzbekistan 14.4 Dec-17 ▲ Rising 19.5
Venezuela 24600.0 May-18 ▲ Rising 13864.6

When Saudi Arabia and United Arab Emirates introduced sales taxes (VAT) on 1 January 2018, the move was supposed to be coordinated with four other Gulf states, Bahrain, Oman, Qatar and Kuwait. However, none of these was ready then and doubts are growing about when they will be. The current target date is 2019 for the first three countries mentioned, but in Kuwait, parliament has demanded a delay until 2021 at least.

Malaysia cut its GST sales tax from 6% to 0% on 1 June 2018 and plans to replace it with a different sales tax on 1 September 2018, with the rate likely to be 10%.

Angola is also planning to abolish its old 10% consumption tax and introduce a new 14%-VAT regime on 1 January 2019.

And in the United Kingdom, online shopping prices will soon be included in the calculation of official inflation for the first time, once the Office for National Statistics has completed its research. The move could well have the effect of bringing inflation indices down, as many goods are cheaper online.

Finally, here is the current inflation watch-list:

On watch! (notable rise in inflation, but below 10%)
Country Latest CPI Data month Up from
Fiji 5.1% May-18 2.6% Mar-18
Iran 9.7% May-18 7.9% Apr-18
Jordan 5.1% May-18 3.6% Feb-18
Lebanon 6.5% May-18 5.4% Mar-18
Pakistan 5.2% Jun-18 3.7% Apr-18
Romania 5.4% Jun-18 4.3% Jan-18
Uruguay 8.1% Jun-18 6.5% Apr-18
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