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Inflation round-up

There have been no additions to our 10%-plus inflation table since our last round-up two months ago, and nor did any country manage to lower its inflation rate enough to be removed. A couple of countries - Lebanon and Sudan - saw official inflation jump alarmingly and, while neither was a great surprise given their ongoing crises, such sharp increases in prices could complicate remuneration of international staff working in these countries. ECA's September 2020 Cost of Living Survey will very soon be published and should shine a light on conditions in these difficult locations - and indeed almost everywhere else - but if you need additional assistance, do please get in touch.

Arguably the most interesting aspect of the table this time is the new set of International Monetary Fund predictions for 2021 inflation (see the first table below). Such forecasting is fraught with difficulty, and the IMF obviously feels even its experts can't make a meaningful attempt to estimate inflation for Argentina, Lebanon or Syria (ECA will produce cost-of-living indices for the first two of these at least throughout 2021). Indeed, there is currently fierce debate among economists about what sort of legacy Covid-19 will have on global inflation. However, such caveats aside, these forecasts are nevertheless useful pointers for global mobility teams trying to plan ahead and forestall potential problems.

High-inflation countries (annual CPI 10%+)
Country CPI % Data month Trend IMF 2021 forecast %
Angola 23.2 Sep-20 ▲ Rising 20.6
Argentina 36.6 Sep-20 ▼ Falling n/a
D R Congo 19.8 Sep-20 ► Stable 12.1
Ethiopia 19.3 Oct-20 ▼ Falling 11.5
Ghana 10.1 Oct-20 ▼ Falling 8.7
Guinea 11.0 Aug-20 ► Stable 8.0
Haiti 25.7 Jul-20 ▲ Rising 23.8
Iran 34.5 Sep-20 ▲ Rising 30.0
Lebanon 131.0 Sep-20 ▲ Rising n/a
Liberia 13.1 Jun-20 ▼ Falling 9.5
Nigeria 14.3 Sep-20 ▲ Rising 12.7
Sierra Leone 13.7 Sep-20 ► Stable 15.5
Sudan 212.3 Sep-20 ▲ Rising 129.7
Surinam 39.9 Sep-20 ▲ Rising 51.0
Syria 13.1 Aug-19 ▲ Rising n/a
Turkey 11.9 Oct-20 ► Stable 11.9
Turkmenistan 13.4 Dec-19 ▲ Rising 6.0
Uzbekistan 11.5 Oct-20 ▼ Falling 10.7
Venezuela 1813.1 Sep-20 ▼ Falling 6500.0
Zambia 16.0 Oct-20 ▲ Rising 13.3
Zimbabwe 471.3 Oct-20 ▼ Falling 3.7

One thing which could help contain inflation, and not just in Asia-Pacific, is the signing of arguably the biggest free-trade deal in history this month. The so-called Regional Comprehensive Economic Partnership (RCEP), agreed between 15 Asia-Pacific nations, including China, Japan, Australia and New Zealand, will not just reduce tariffs on exported goods and bureaucratic costs of trading them, but will also simplify trade rules and make it considerably cheaper to build regional supply chains. All in all, costs for exporters are expected to decline significantly, lowering prices worldwide for items made in these countries.

In other inflation news, Oman has brought forward its forthcoming introduction of 5% sales tax (VAT) to 1 April 2021. Originally, the reform was due to take place alongside other Gulf states in 2018, but Oman had postponed the measure until 2022.

Covid-19 has already had a big upward impact on food prices, especially in emerging markets, and fears are growing that government stockpiling of grains and other basic foodstuffs in anticipation of further coronavirus infection waves will drive agricultural commodity prices even higher. Climate-change impacts, such as widespread drought recently, are adding to concerns.

It isn't just developing countries threatened by rising food prices. In the United Kingdom food costs are already rising at their fastest rate in more than five years, but should Britain fail to reach a free-trade deal with the European Union in the next couple of weeks, the tariffs which would be applied on imports from the EU on 1 January 2021 would add up to a further 4% average rise in food prices in the UK.

And in the United States, numerous companies (including some sellers on Amazon) have been accused of 'price gouging' during the pandemic. Such unfair profiteering through price gouging is by nature temporary, so it isn't usually a long-term problem, but it can easily raise shorter-term concerns, not least among expatriate staff in affected countries, that one's cost of living is rising alarmingly, even if it isn't overall.

Finally, here is our regular watch list:

On watch! (notable rise in inflation, but below 10%)
Country Latest CPI % Data month Up from
Guatemala 5.0 Sep-20 2.9% Jul-20
Lesotho 6.0 Aug-20 4.9% Jun-20
Niger 5.7 Aug-20 2.6% Jun-20
Papua New Guinea 6.0 Jun-20 3.1% Mar-20
Saudi Arabia 5.7 Sep-20 0.5% Jun-20
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