The Three Countries With The Highest Inflation
Elevated inflation can be harmful to a country's economy. Moreover, as prices rise, if wages don't keep pace, workers lose purchasing power and are less able to obtain what they need including the basic necessities of life. If inflation becomes too high, and especially if it persists, it can have a rather dramatic effect on the econometric-social structure of a nation. In other words, it tends to create a two-class system, eliminating the middle-class. Inflation can occur when a country prints too much of its currency and it loses value relative to other currencies. The problems are magnified if the world loses confidence in the currency. These events make it more difficult to attract foreign capital which is often necessary for economic growth.
In this article, we'll discuss the three countries with the world's highest inflation rate. We'll also include a brief, but important narrative on the economic and political climate of each country listed. Let's begin south of the border in Venezuela.
NOTE: The inflation rates quoted in this article represent the increase in prices from one year earlier as reported from Trading Economies.
#1 - Venezuela
Background
Venezuela is the fifth largest member of OPEC as measured by the production of oil. It derives over 50% of its GDP from petroleum exports which represents about 95% of total exports. From the 1950s to the early 1980s, Venezuela had the strongest economy in South America. Today, it's one of the most repressive regimes in the world, especially with regards to property rights. Owners of private property have regularly had their property confiscated by the government, often without compensation. This practice is known as expropriation or eminent domain. Although this is entirely legal (including here in the U.S.), it has been greatly abused in Venezuela.
Inflation
Venezuela has a current inflation rate of 57.30%. The country has been suffering from inflation for many years (see chart below). During the period from 1973 to 2014, it's been as high as 115.18% and as low as 3.22%. The annual rate has exceeded 100% during two episodes. The first occurred in June 1989 when it hit 103.29%. The second time, inflation remained above 100% for seven months from July 1996 (108.13%) to January 1997 (103.24%). Currently, it's on the rise again and many economists believe it could breech the century mark once again and hyperinflation will ensue. What's particularly disturbing for the citizens of Venezuela is that, after the mid 1980s, the annual inflation rate has been above 20% more often than not (see red dotted line in the graph).
#2 Iran
Background
What was known as Persia until 1935, Iran's history predates the time of Christ by several millennia. In addition, it's situated in an area where territorial and religious conflicts are common. As a result, Iran's economy is influenced by these conflicts. It is also greatly affected by the price of oil which is the major source of Iran's revenue. Because of heavy-handed government policies, it has a weak private sector and economy. This is problematic because a strong private sector is essential for a vibrant economy.
Inflation
Iran has an inflation rate of 19.70% which ranks second behind Venezuela. The highest rate Iran has had was 59.02% in May 1995. In fact, from April 1995 through January 1996, Iran's inflation rate remained above 50% with the exception of October 1995 when it fell to 46.17%. A high, sustained rate of inflation is trouble for any economy. Iran's economy is contracting as its GDP is -5.50% over the trailing 12 month period. In essence, the Iranian economy is in recession.
#3 - Argentina
Background
Argentina is rich in natural resources and has a diverse industrial base. Although it was one of the world's wealthiest countries a century ago, the past 100 years have been marked with economic crisis, inflation and other related problems. In fact, on November 1, 2001, due to fear that the country would devalue its currency, there was a massive run on the banks, which was met with a limit on withdrawals by the government. Argentina suffered a massive flight of capital (i.e.; money left the country), the economy suffered a severe decline and riots ensued, killing dozens.
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Inflation
Argentina's inflation rate seems rather benign in comparison to the previous countries mentioned. Currently, it is 10.90%. However, Argentina's highest annual rate of inflation was a staggering 20,262% in the 12 month period ending April 1990. That definitely constitutes hyperinflation! To translate using U.S. dollars, an item which cost $1 in May 1989 would have cost $203.62 one year later. Argentina was in a depression from late 1998 to 2002. During this period, GDP bottomed at -16.3% in the first half of 2002. This depression was preceded by several rounds of economic contraction from 1974 to 1990. Today, Argentina's economy is doing better with GDP of 5.50% and a slightly elevated unemployment rate of 6.40%. However, inflation is still too high and the country's short-term money market rate is also elevated at 14.73%. Even so, at least inflation is lower than its interest rate, leaving investors with a positive real return on their money.
Summary
High inflation is a destructive force. Venezuela is in the throes of a serious inflationary period. Iran's economy is in recession. Argentina seems to be in the best position of the three, but has a few challenges. Venezuela and Iran have intrusive government policies which hinder private sector growth. Until these nations create a more open and free economic environment which will attract outside capital and business, they will likely continue to suffer economically. Meanwhile, many citizens are forced to live in poverty and because they're poor, they cannot afford to relocate, something the wealthy can easily do.
Situation Precarious For Tens Of Thousands Of Children In Indonesia
On September 28, a powerful earthquake struck the Indonesian island of Sulawesi, followed by a tsunami with waves up to 20 feet high. One week later, the death toll has risen to 1,581, and that number is expected to increase as more bodies are recovered. More than 66,000 houses have reportedly been damaged and at least 70,000 people are homeless.
The situation remains particularly precarious for tens of thousands of child survivors, many of whom have been separated from their families. The longer a child is separated from her or his family, the more difficult it is to locate them and the more at risk a child is to violence, economic and sexual exploitation, abuse and potential trafficking.
On October 2, 2018, 6-year-old Hilwa cries in the refugee camp in the RRI office as she waits for her mother to return from searching for her missing brother in East Lolu, Palu City, Central Sulawesi. © UNICEF/UN0240351/WILANDER
UNICEF is working with a team of social workers from the Indonesian Ministry of Social Affairs to identify separated and unaccompanied children, as well as support family reunification and tracing. In the coming days, UNICEF will also set up Child-Friendly Spaces, temporary classrooms, distribute recreational materials and provide psychosocial support to help children cope in the aftermath of the twin disasters.
On October 3, 2018, 10-year-old Rido Saputra stands in front of the ruins of his home, destroyed by a tsunami in Donggala Regency, Central Sulawesi, Indonesia. © UNICEF/UN0240792/WILANDER
Central Sulawesi is a region with low birth registration: 43 percent of the children live in poverty and only one-third are registered, leaving them without official proof of identity and at increased risk of exploitation. Above, 10-year-old Rido Saputra stands in front of the ruins of his home, destroyed by a tsunami in Donggala Regency, Central Sulawesi, Indonesia.
On October 4, children affected by the recent earthquake and tsunami in Palu stand in front of a tent sheltering displaced people in the front yard of the Great Mosque of Palu, Central Sulawesi. © UNICEF/UN0241240/WILANDER
Twelve posts have been set up in the affected area to identify children who may have been separated from their families or are unaccompanied. These locations are also being used as safe spaces for children to play and recover. Above, children affected by the recent earthquake and tsunami in Palu stand in front of a tent sheltering displaced people in the front yard of the Great Mosque of Palu, Central Sulawesi.
Frightened by aftershocks from the earthquake, a little girl cries while two boys comfort her in the evacuation tent yard of the RRI office, East Lolu, Palu City, Central Sulawesi. © UNICEF/UN0240354/WILANDER
Frightened by aftershocks from the earthquake, a little girl cries while two boys comfort her in the evacuation tent yard of the RRI office, East Lolu, Palu City, Central Sulawesi. UNICEF and Indonesia's Ministry of Social Affairs are preparing social workers to provide psychosocial support for children who have been affected by the earthquake and tsunami, and to protect children in case of violence, abuse or exploitation.
On October 2, 2018 in Indonesia, 2-year-old Fatimah sits on her mother's lap in the evacuation tent yard of the RRI office, East Lolu, Palu City, Central Sulawesi. © UNICEF/UN0240347/WILANDER
When an emergency strikes, children require special protection to ensure their safety and well-being. Two-year-old Fatimah sits on her mother's lap in the evacuation tent yard of the RRI office, East Lolu, Palu City, Central Sulawesi, Indonesia.
Please support UNICEF's efforts to reunite children with their families.
