Inflation: 8 countries on the brink as new data shows extent of crisis
New data from GMI shows the global nature of today’s inflation crisis.
Of all the countries in the world, 80% are currently experiencing inflation above 6%.
It’s the highest number of countries in the midst of extreme inflation for four decades. And the chart below illustrates just how rapidly the inflation problem has emerged.
While inflation in the United States and other developed western nations has reached multi-decade highs in the wake of the COVID-19 pandemic and the Ukraine conflict, it’s emerging markets where inflation is causing the most pain.
Turkey tops the list, where food prices have jumped around 95% over the past 12 months. On top of massive inflationary pressures resulting from fractured supply chains, the local currency has crashed – down almost 60% since the start of 2021.
Elsewhere, in Argentina, analysts expect inflation could hit 90% by the end of this year, and in Sri Lanka, where major riots have continued, experts tip inflation will hit 70%.
Countries on verge of collapse
Brad Sester from the Council of Foreign Relations believes countries in South Asia, Africa and South America are most at risk of collapse including, Pakistan, Tunisia, Sri Lanka, Egypt, Ghana, Kenya, El Salvador and Argentina.
“Some of these countries could have been able to muddle through in a more benign global environment but now have little choice but to seek assistance from the IMF,” he says.
“Vulnerable countries can no longer rely on the international bond market and Chinese lending to make up for a shortage of tax revenue and to help pay for imports of oil and gas.
“Many of the conditions needed to resolve a balance-of-payments crisis – such as a weaker currency and cuts to subsidies—are particularly painful at a time when shortages of food and fuel are driving up prices globally.”
War time-like levels of fiscal stimulus during the COVID-19 pandemic, decades of QE in the west, efforts to decarbonize, along with fractured supply chains resulting from lockdowns and the conflict in Ukraine are all being blamed for the global inflationary pulse.
Last year, Steen Jakobsen tipped we’d soon experience inflation “like never before” in the Asia Markets article below. It’s now apparent it was an astute call by the Saxo Markets Chief Investment Officer.