Unless politicians or economists come up with some new ideas to stimulate global growth, the world is heading for years of economic mediocrity.
In a recent tough talking summing up of economic progress since the downturn, International Monetary Fund (IMF) head Christine Lagarde argued that after six years, growth and economic performance was still disappointing and a hair’s breadth away from tipping back into recession.
She told politicians and financial policymakers that they need to do more or face years of economic stagnation.
Looking around the world, it’s easy to see what she means.
Prices are falling in 27 countries and 38 more have inflation below 1% – that’s almost a third of the countries in the world.
Inflation worries
Meanwhile, inflation in leading economies like the USA, Britain and China is on the slide.
Two drivers are bringing down the cost of living:
- Falling commodity prices due to bumper harvests
- Low demand as unemployment, low wages and poor confidence in economies combine to discourage spending
“If all these years of record low interest rates and quantitative easing haven’t helped the global economy get back on track, it’s doubtful anyone has a policy up their sleeve that will make any real change,” said Andy Payne, Economic Analyst at ECA International.
He points out that average global inflation has dropped again. Inflation in the G20 group of developed countries fell to 2.7% from 2.8%. The group accounts for around 90% of global economic activity.
For expats, inflation is a good reason why contracts paid in a major currency are essential.
Danger signals
Russia is given as an example by Payne. Inflation is running at 7.5% and expats paid in roubles will find their spending power diminishes if they convert the cash back to a stronger currency.
According to ECA International, the countries with the highest inflation are:
- Venezuela (63.4%) – High prices are still raging after months of dithering by the government over whether to take action to devalue the currency
- Syria (48.9%) – Inflation is fuelled by the country’s internal strife
- Malawi and Sudan both have inflation at more than 30% mainly due to corruption, civil war and poor fiscal management.
- Argentina (29.3%) – Repeated defaults on interest payments on international borrowing have triggered rising inflation, which is thought to be quoted at an artificially low rate by the government. Financial experts believe the figure is nearer 40%
Read more about nations with high inflation
