Mapped: Which Countries Have the Highest Inflation?

Mapped: Which Countries Have the Highest Inflation Rate?

Inflation is surging nearly everywhere in 2022.

Geopolitical tensions are triggering high energy costs, while supply-side disruptions are also distorting consumer prices. The end result is that almost half of countries worldwide are seeing double-digit inflation rates or higher.

With new macroeconomic forces shaping the global economy, the above infographic shows countries with the highest inflation rates, using data from Trading Economics.

Double-Digit Inflation in 2022

As the table below shows, countless countries are navigating record-high levels of inflation. Some are even facing triple-digit inflation rates. Globally, Zimbabwe, Lebanon, and Venezuela have the highest rates in the world.

As price pressures mount, 33 central banks tracked by the Bank of International Settlements (out of a total of 38) have raised interest rates this year. These coordinated rate hikes are the largest in two decades, representing an end to an era of rock-bottom interest rates.

Going into 2023, central banks could continue this shift towards hawkish policies as inflation remains aggressively high.

The Role of Energy Prices

Driven by the war in Ukraine, energy inflation is pushing up the cost of living around the world.

Since October 2020, an index of global energy prices—made up of crude oil, natural gas, coal, and propane—has increased drastically.

Compared to the 2021 average, natural gas prices in Europe are up sixfold. Real European household electricity prices are up 78% and gas prices have climbed even more, at 144% compared to 20-year averages.

Amid global competition for liquefied natural gas supplies, price pressures are likely to stay high, even though they have fallen recently. Other harmful consequences of the energy shock include price volatility, economic strain, and energy shortages.

“The world is in the midst of the first truly global energy crisis, with impacts that will be felt for years to come”.

-Fatih Birol, executive director of the IEA

Double-Digit Inflation: Will it Last?

If history is an example, taming rising prices could take at least a few years yet.

Take the sky-high inflation of the 1980s. Italy, which managed to combat inflation faster than most countries, brought down inflation from 22% in 1980 to 4% in 1986.

If global inflation rates, which hover around 9.8% in 2022, were to follow this course, it would take at least until 2025 for levels to reach the 2% target.

It’s worth noting that inflation was also highly volatile over this decade. Consider how inflation fell across much of the rich world by 1981 but shot up again in 1987 amid higher energy prices. Federal Reserve chair Jerome Powell spoke to the volatility of inflation at their November meeting, indicating that high inflation has a chance of following a period of low inflation.

While the Federal Reserve projects U.S. inflation to fall closer to its 2% target by 2024, the road ahead could still get a lot bumpier between now and then.

Source: Visual Capitalist

The Philippines’ inflation rate surges to 8% in November 2022

The country’s headline inflation accelerated further to 8.0 percent in November 2022, from 7.7 percent in October 2022.

This is the highest recorded inflation since November 2008. With this month’s inflation, the country’s average inflation rate from January to November 2022 stood at 5.6 percent.

In November 2021, inflation rate was observed at 3.7 percent.

The sustained acceleration of inflation in November 2022 was mainly due to the higher year-on-year growth rate in the index of food and non-alcoholic beverages at 10.0 percent, from 9.4 percent in October 2022. Also contributing to the uptrend is the higher annual increment in the index of restaurants and accommodation services at 6.5 percent, from 5.7 percent in October 2022. Moreover, relative to their annual rates in October 2022, annual increases were also higher in the indices of the following commodity groups:

a. Alcoholic beverages and tobacco, 10.6 percent; b. Clothing and footwear, 3.6 percent; c. Furnishings, household equipment and maintenance, 4.5 percent; d. Health, 2.8 percent; e. Information and communication, 0.7 percent; f. Recreation, sport and culture, 3.3 percent; g. Education services, 3.6 percent; and h. Personal care, and miscellaneous goods and services, 4.2 percent.

On the other hand, slower year-on-year increases were observed in the indices of housing, water, electricity, gas and other fuels at 6.9 percent; and transport at 12.3 percent.

Meanwhile, the index of financial services retained its previous month’s inflation rate.

Core inflation, which excludes selected food and energy items in the headline inflation, also increased to 6.5 percent in November 2022, from 5.9 percent in October 2022. In November 2021, core inflation was lower at 2.4 percent.

Food inflation at the national level rose further to 10.3 percent in November 2022, from 9.8 percent in October 2022. In November 2021, food inflation stood at 2.3 percent.

The uptick in the food inflation was primarily influenced by the higher annual growths in the vegetables, tubers, plantains, cooking bananas and pulses index at 25.8 percent; and rice index at 3.1 percent. In addition, faster annual increments were noted in the following food groups:

a. Flour, bread, other bakery products, pasta products, cereals, 10.3 percent; b. Milk, other dairy products and eggs, 9.4 percent; c. Fruits and nuts, 6.2 percent; d. Sugar, confectionery and desserts, 38.0 percent; and e. Food products not elsewhere classified, 8.9 percent.

On the contrary, slower annual growths were observed in the indices of the following food groups:

a. Corn, 27.0 percent; b. Meat and other parts of slaughtered land animals, 8.6 percent; c. Fish and other seafood, 8.3 percent; and d. Oils and fats, 19.8 percent.

Source: PSA

IMF: BSP must be ready if inflation risk rises

Inflation is one of the primary challenges faced by the Philippines, and the International Monetary Fund (IMF) thinks the Bangko Sentral ng Pilipinas (BSP) must be more aggressive in raising interest rates in the event that the situation worsens.

In the IMF Executive Board’s recently concluded 2022 Article IV Consultation with the Philippines, the Washington-based lender said should inflation worsen, they would recommend that the BSP respond with a tighter monetary policy stance.

Inflation in the Philippines, IMF said, is being fueled by the strong dollar, higher commodity prices, and tightening global financial conditions. IMF said high inflation has weakened the country’s external position and narrowed its fiscal space.

“The BSP’s prompt action to fight inflation is welcome, but further monetary tightening may be needed to keep inflation expectations well anchored,” IMF said.

“The current policy stance remains accommodative, and BSP should aim at bringing the policy rate close to the neutral real rate to securely bring inflation within the target range,” it explained.

However, the IMF noted that should inflation become less persistent or downside risks to growth materialize, the BSP should also recalibrate its monetary policy tightening.

“Monetary policy should be the first line of defense against persistent inflationary pressures,” IMF said. “The use of FXI [foreign exchange intervention] can mitigate a sharp and disorderly exchange rate depreciation, alleviate inflation, and reduce some of the pressure on monetary policy.”

The IMF expects consumer prices to average 5.3 percent this year; 4.3 percent next year; and 3.1 percent in 2024.

IMF also expects the current account deficit to increase to 5 percent of GDP in 2022, but decline to about 1.7 percent of GDP over the medium term.

Estimates for growth also showed that real GDP is expected to slow to 5 percent in 2023 from 6.5 percent in 2022. Medium-term economic growth is forecast at about 6.3 percent.

“With a difficult global environment weighing heavily on the economy, the economic outlook is subject to significant downside risks, where policy tradeoffs between supporting output on the one hand and reducing inflation and safeguarding the external position on the other, would become more acute,” IMF said.

The IMF also recommended that the government ratify the Regional Comprehensive Economic Partnership (RCEP) Agreement to facilitate the country’s access to imports and boost export diversification efforts.

This, IMF said, would enhance food security and strengthen agricultural performance should focus on raising productivity and promoting new investments in the sector.

Anti-money laundering

Further, the IMF also recommended that the government enhance its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) efforts.

These efforts may include prioritizing amendments to the bank secrecy law to enhance the BSP’s supervisory powers, strengthen AML/CFT effectiveness and reduce vulnerabilities to corruption.

In October, the Anti-Money Laundering Council (AMLC) froze a total of P8 billion worth of accounts and real properties linked to various money laundering activities such as drugs, corruption and terrorism over the past two decades.

In a Senate Finance Committee Hearing on Monday, AMLC Executive Director Matthew M. David said the amount includes some P3 billion worth of forfeited accounts and properties while the remaining P5 billion are still pending litigation.

David said in the past 20 years, the AMLC forfeited and turned over to the national government P93 million from money-laundering activities and some P95 million have also been forfeited but still pending execution.

The AMLC official said some P16 million have also been forfeited but are waiting for the dates of execution; while P35 million that have been forfeited are currently facing appeals.

A total of P110 million of the accounts and real properties linked to corruption have been turned over to the Office of the Ombudsman for execution.

Based on the rules, David said, the Ombudsman is tasked to forfeit funds linked to corruption and turn these funds over to the Bureau of the Treasury.

Source: Business Mirror