Inflation is one of the hottest topics in the press right now all over the globe. The Russian invasion of Ukraine which marked its first anniversary last month upended global commodity and energy markets, with the resulting imbalance causing prices to shoot up all over the world. Countries that were excessively reliant on imported energy and food were the highest hit, with inflation soaring to high double digits and causing pain to vast chunks of their population.
The impact of inflation on the every day consumer is two-fold. First, it leads to less disposable income as higher prices for necessities such as gas and energy take up a larger chunk of the spending budget. Then, it also eats through savings without any fault of the saver, since high prices mean that money is now worth less when it comes to purchasing power. However, the general public is not the only one that is affected by high inflation. It also makes the cost of doing business higher for companies, which then forces them to institute cost cutting measures to preserve their margins and generate shareholder value. Companies also see their belts tighten due to the after effects of inflation, which is when central banks tighten their monetary policy and start to increase interest rates.
This increase uses the simple concept of supply and demand to try to influence spiraling price growth. The lower the interest rate is, the easier it is for companies or people to borrow to finance their purchases. This also reduces their incentive to save in banks, and end up increasing the flow of money in the economy. Think of it as $100 competing for two bottles of milk; naturally, this will cause the bottle to be priced at $50 per piece. On the flip side, a higher interest rate makes borrowing difficult and incentivizes saving, and if for the sake of our argument, we assume that a 2x increase in interest rate cuts the money supply in half, then in our example, you now have $50 competing for two bottles - which then brings the price down to $25 a bottle.
Since inflation and interest rates are intertwined courtesy of monetary policy theory, the latter is another hot topic these days - particularly in the U.S. The Federal Reserve, tasked with controlling prices after the money that was injected into the market to contain the economic fallout from the coronavirus pandemic, is on an interest rate hike spree the likes of which has not been seen in decades. Fed chairman Jerome Powell and his colleagues on the monetary policy committee have continually signaled their intent to continue increasing interest rates as long as inflation continues to rise.
The U.S. measures inflation through a metric called the consumer price index (CPI). This reflects a 'basket of goods' such as housing, gas, and food and ascribes them a weight reflecting their importance in an average person's consumption to calculate the effects of macroeconomic factors on spending power. The latest CPI data, which came out in February 2023, saw housing account for the largest weight which sat at 44.4%. The latest CPI reading, which measured inflation in January, surpassed analyst estimates and sat at 0.5% - with a corresponding annual growth of 6.4%. This was higher than the estimated 0.4% monthly and 6.2% annual reading and saw the stock market tumble once again as investors braced for more interest rate hikes.
However, while the U.S. is facing historic inflation, it still is not on the list of regions that are facing the sharpest price increases.
We used data from Trading Economics to compile our list of the countries with the highest inflation rates. However, the data has been verified to iron out any inconsistencies and has been updated where needed.
Countries with the Highest Inflation Rates
15. Republic of Sierra Leone
Latest Annualized Inflation Reading: 38.48%
The Republic of Sierra Leone is a West African country with a GDP of $12 billion and a per capita income of $1,608. It relies primarily on metals exports for its foreign exchange revenue, and as of January 2023, was suffering from high inflation of 38.48%. Additionally, while Sierra Leone relies on the mining industry for its export base, a vast proportion of its population lives on subsistence farming, through which it grows its own food for consumption. Its largest trading partner for both imports and exports is China, and it is also one of the biggest sufferers of the 'resources curse' where countries that are rich in mineral resources fail to develop their industries since mining products provide them with stable foreign exchange earnings.
14. Lao People's Democratic Republic
Latest Annualized Inflation Reading: 40.3%
The Lao People's Democratic Republic, simply known as Laos, is a landlocked Southeast Asian country. It is one of the smallest countries in the world both in terms of its population and GDP. The Laotian GDP is currently estimated to sit at $68 billion in purchasing power parity terms, lending it a per capita income of $9,166. Inflation in the country soared to a 23-year high in January 2023, as it sat at a record 40.3%. At the same time, its government is also taking measures to stabilize the exchange rate, and has suspended foreign exchange dealers that are linked with commercial banks.
13. Republic of Cuba
Latest Annualized Inflation Reading: 42.08%
The Republic of Cuba is an island nation located at the junction of the Atlantic Ocean, the Caribbean Sea, and the Gulf of Mexico. The country has a $254 billion GDP with a relatively high per capita income of $22,237. Inflation in Cuba sits at 42.08% as of January 2023, and it has teamed up with Brazil, Columbia, Mexico, and Argentina to battle the price increases.
12. Islamic Republic of Iran
Latest Annualized Inflation Reading: 47.7%
The Islamic Republic of Iran is an Asian country with vast resources of petroleum fuels. The country's GDP sits at $1.6 trillion, lending it a GDP per capita of $18,663. Petroleum and mineral products account for half of Iran's exports, and its largest trading partner is China. Iran is currently at risk of hyperinflation, with the latest reading placing it at 47.7%. Inflation has soared in the wake of the government removing subsidies for imported essential goods, and Iranians are at risk of severe malnutrition as a result.
11. Republic of Haiti
Latest Annualized Inflation Reading: 48.3%
The Republic of Haiti is an island country located in the Caribbean sea. It has one of the smallest economies in the world, which is worth $34 billion, and a GDP per capita of $2,962. The latest available data for inflation in Haiti is for December 2022, and it pegs the annual price increase at 48.3%. The resulting economic crisis has further destabilized the country, with hundreds of people fleeing Haiti to cross over into the U.S.
10. Democratic Socialist Republic of Sri Lanka
Latest Annualized Inflation Reading: 50.6%
The Democratic Socialist Republic of Sri Lanka, or simply Sri Lanka, is a South Asian island nation. It has been consistently in the news for the past year after it became the first Asian country to default on its debt obligations. The aftermath of this saw serious shortages of fuel and other essential items in Sri Lanka and led to high inflation. However, inflation is on a downward trend, with the reading for February 2023 of 50.6%, down from 51.7% in January and 59.2% in December 2022.
9. Republic of Ghana
Latest Annualized Inflation Reading: 53.6%
The Republic of Ghana, or simply Ghana, is a West African coastal country. Its GDP per capita in nominal terms is one of the lowest in the world and currently sits at $2,369. Ghana's January 2023 inflation currently sits at 53.6%, and despite the high reading, offered some respite as it dropped down from December's 54.1% which was a two-decade high for the country. Ghana also effectively defaulted on its debt obligations in December 2022 as it suspended payments.
8. Republic of Türkiye
Latest Annualized Inflation Reading: 55.18%
The Republic of Türkiye, informally known as Turkey, is an Asian and European country. Turkey's economic crisis has made headlines for years now, as the U.S. dollar has appreciated against its currency by a whopping 500% over the past five years. Behind the Lira's downfall is Turkey's low interest rates, with its president citing religious reasons to keep rates low. This in turn has also fueled inflation, causing it to jump as high as 57% last year. Currently, Turkish inflation sits at 55.18%.
7. Republic of Suriname
Latest Annualized Inflation Reading: 55.5%
The Republic of Suriname is a South American country that gained independence from the U.K. in 1975. It is one of the smallest countries in the world in terms of population and has a GDP of $10.7 billion. A high inflation of 55.5% along with austerity measures is causing unrest in the country, with protestors recently having stormed its parliament.
6. Republic of the Sudan
Latest Annualized Inflation Reading: 83.6%
The Republic of the Sudan is a Northeastern African country that has a $207 billion GDP and one of the lowest per capita incomes in the world of $4,450. Sudan's inflation in January 2023 stood at 83.6%, and according to estimates from the International Monetary Fund (IMF), will sit at 76.9% this year - the third highest in the world.
