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Inflation round-up

As expected, Iran's inflation has rapidly gone back into double figures following a major devaluation of the rial (see first table below). With the United States due to re-impose sanctions on Iranian oil sales on 6 November, pressure on exchange rates is sure to increase, so Iran's inflation will rise further. The impact on expatriate purchasing power will depend on how assignees are paid. A sizeable proportion of remuneration paid in any hard currency, for instance, can now be converted into significantly more local currency in Iran following the depreciation of the rial, thereby offsetting to at least a large degree the effects of rising prices for goods and services.

High-inflation countries (CPI 10%+)
Country CPI % Last reported Trend IMF 2018 forecast
Angola 19.5 Jul-18 ▼ Falling 27.9
Argentina 31.2 Jul-18 ▲ Rising 22.7
DR Congo 12.2 Jul-18 ▼ Falling 25.9
Egypt 14.2 Aug-18 ► Stable 20.1
Ethiopia 14.1 Jul-18 ▼ Falling 11.2
Haiti 13.6 Jul-18 ► Stable 11.1
Iran 13.7 Jun-18 ▲ Rising 12.1
Liberia 21.4 Apr-18 ▲ Rising 11.7
Libya 12.1 Apr-18 ▼ Falling 24.3
Nigeria 11.7 Jul-18 ▼ Falling 14.0
Sierra Leone 16.6 Jun-18 ▲ Rising 13.9
South Sudan 161.2 Mar-18 ▲ Rising 104.1
Sudan 63.9 Jul-18 ▲ Rising 43.5
Turkey 17.9 Aug-18 ▲ Rising 11.4
Venezuela 200000.0 Aug-18 ▲ Rising 1 000 000.0

Inflation is on the up globally too. Oil prices, which hit USD 80 per barrel on 12 September, partly because of the Iranian situation, are one factor. But agricultural commodity costs are also rising because of the drought which persisted through the northern hemisphere's long, hot summer. Food prices are already increasing in many countries, but worst affected - and some will want to take a seat at this point - could be beer prices! Having had to cope a couple of months ago with a shortage of carbon dioxode gas (which puts the fizz into lagers etc), breweries are now in short supply of malted barley and other key grains used to ferment and flavour different beers. Wherever you are, expect to pay more for your pint/stein/demi/schooner/pot/pitcher/yard very soon!

As an illustration of how global inflation has risen lately, note that two years ago there were 43 countries experiencing deflation; now there are only eight. This trend is not just down to energy and food costs, though. It is also a sign of success - evidence of more demand in the world economy after a decade of weakness following the global financial crisis.

In Turkey, where import costs have been rising sharply due to currency weakness, the government on 1 September hiked gas and electricity prices by as much as 14%. The move is essential to protect public finances and foreign-exchange reserves but, needless to say, it will mean even higher inflation. The latest reading jumped to nearly 18% in August.

Venezuela has seen another enormous leap in inflation, according to the opposition-led National Congress, which puts the annual figure at 200 000%! However, the crisis in the country is now so acute that the data is almost certainly guesswork to some degree. The same can be said of the IMF's latest forecast of one million percent inflation for Venezuela by the end of the year. Accurate or not, such figures provide further evidence of the extent of economic collapse in the country which still has the world's largest oil reserves. Venezuela has also finally abandoned its fuel subsidies which for years created the world's cheapest petrol.

With an election looming in 2019, India's government has moved into generosity mode, giving farmers a big rise (average 15%) on the minimum prices paid for their crops. Although the measure is likely to push up national price indices (the food category has a big weighting in the calculation of Indian inflation) and could even result in an appearance for India in our watch-list table (below) soon, it may have a smaller impact on expatriates' spending power. International assignees tend to spend a smaller proportion of income on food than most local nationals, a fact accounted for in ECA's cost of living indices which are designed to reflect expatriate lifestyles.

On watch! (notable rise in inflation, but below 10%)
Country Latest CPI Data month Up from
Algeria 5.9% Jun-18 4.7% May-18
Jordan 5.1% Jun-18 3.6% Feb-18
Lebanon 7.6% Jul-18 6.5% May-18
Mongolia 7.3% Jun-18 6.2% May-18
Mozambique 5.0% Aug-18 3.3% May-18
Myanmar 7.6% Jul-18 5.9% May-18
Pakistan 5.8% Aug-18 3.7% Apr-18
Philippines 6.3% Aug-18 5.2% Jun-18
Uruguay 8.3% Aug-18 7.2% May-18
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