Partly three-digit rates: where inflation is highest

There has never been nearly eight percent inflation since reunification. Compared to other countries, however, Germany is not in a bad position. An overview of the global frontrunners.

Prices are rising almost everywhere in the world. The global inflation rate for the current year is estimated at an average of 7.7 percent, according to the Economic Experts Survey (EES). According to the survey by the Ifo Institute and the Institute for Swiss Economic Policy with participants from over 100 countries, the expected inflation is around five percentage points above the average rate reported by the World Bank over the past decade. However, there are sometimes significant regional differences in inflation. Some states are even struggling with three-digit rates. Where are the prices particularly high? And what are the reasons for this?

Germany below the euro zone average

According to the Federal Statistical Office, goods and services in Germany cost an average of 7.9 percent more in August than a year earlier. The biggest price driver, with an increase of 35.6 percent – unsurprisingly – is energy. But people in this country also had to pay 16.6 percent more for food than in August 2021.

According to the European statistics office Eurostat, consumer prices in Germany recently increased by 8.8 percent. The difference lies in the basis of calculation: in order to make price changes internationally comparable, Eurostat does not use the national index of consumer prices (CPI), which reflects the actual cost of living, but the harmonized index of consumer prices (HICP).

Despite the current record level, Germany is thus below the average in the euro zone – albeit only just. Because inflation in the 19 countries that use the euro as their currency passed the nine percent mark last month. Since the introduction of the euro as book money in 1999, inflation has never been higher than in August.

Baltic States on the podium

In the euro area, too, there was the biggest leap in energy prices. In view of the Ukraine war and the cut gas supplies from Russia, these rose by 38.6 percent compared to the same month last year. Food, alcohol and tobacco follow at a considerable distance (10.6 percent).

In Europe alone, however, it is clear that inflation does not have all countries equally under control. According to Eurostat, the lowest annual rates were recorded in France (6.6 percent), Malta (7.0 percent) and Finland (7.9 percent). In contrast, inflation has risen particularly sharply in the Baltic states. At the top is Estonia with an annual rate of 25.2 percent. This is followed by Latvia with 21.4 percent and Lithuania with 21.1 percent. With regard to the extremely high inflation in the Baltic States, experts point to a different structure in private household spending.

Both energy prices and food costs, which have skyrocketed this year, weigh more heavily in small countries relative to income. According to estimates, food accounts for almost a quarter of the available salary there. In Germany, on the other hand, the share for rent or other fixed costs is much higher.

Double-digit rates not only in Eastern Europe

In addition, the Baltic States are heavily dependent on agricultural imports and fertilizers from Russia, Ukraine and Belarus. However, because imports are currently not possible, they have to resort to expensive alternatives from Sweden or Finland.

In other Eastern European countries that do not belong to the euro area, the price increase is also more drastic than in Germany. In Poland, inflation is 16 percent, in the Czech Republic even 17.2 percent – the highest rate since December 1993. There, too, the composition of the basket of goods, which is the basis for calculating the inflation rate, is cited as the reason. Food, energy and transport costs are weighted higher, so the extreme increases have an even greater impact than in the rest of Europe.

However, there are also exceptions: The inflation rate in Great Britain climbed to over ten percent in July. More than half of the price increases were driven by energy and food costs. In the Netherlands, too, inflation was in double digits in August – and at 13.6 percent it was also significantly higher than in Germany.

Turkey’s inflation rate higher than it has been in 24 years

However, Turkey has by far the highest inflation rate on the European continent. Consumer prices there surged by more than 80 percent in August. Transport costs, including gasoline prices, increased by 117 percent last month. Food and non-alcoholic beverages as well as furniture and household appliances rose by more than 90 percent compared to the previous year. According to an independent group of experts, inflation is unofficially as high as 170 percent.

Prices in Turkey are rising particularly sharply because, as a country poor in raw materials, it is particularly dependent on imports. Due to the Russian attack, however, raw materials have become very expensive and have to be paid for in dollars on the world markets, which further aggravates the situation. Because the weakening exchange rate of the lira means that costs are increasing. The Turkish currency has lost 44 percent in value in the past year, and another 27 percent so far in 2022.

Hyperinflation in parts of Africa and South America

Even three-digit inflation rates are no longer uncommon. For example, prices in Sudan have climbed by almost 200 percent in recent months. The African state has been suffering from a drought for a long time, which means that food has to be digged deep into the pockets. Added to this are the lack of grain deliveries from Russia and Ukraine.

According to UN estimates, 44 million people will go hungry this year. In August, the inflation rate is still only 117 percent – a monthly doubling of prices. The economic conditions and exorbitant price hikes in the country are already causing a lot of unrest, leading to several protests and strikes.

In Venezuela, inflation is 114 percent, higher than anywhere else in Latin America. Only Argentina comes close with 78.5 percent. For Venezuela, which has been synonymous with perpetual crisis, corruption and hyperinflation for many years, this is progress. According to the central bank BCV, the rate of price increases in 2020 was still 2959 percent.

Zimbabwe is number 1

But things can get even worse – for example in the Middle East. In Lebanon, the inflation rate is around 168 percent. The country on the Mediterranean is stuck in the worst economic crisis in its history. 80 percent of the population lives in poverty, food prices have risen by 500 percent. In addition, the Lebanese pound has lost 90 percent of its value.

One reason for this is the civil war in neighboring Syria. Tourism, one of the most important sources of income in Lebanon, collapsed as a result of the armed conflict, as did exports to the Gulf States, most of which were processed via Syria. The neighboring country was also an important sales market for Lebanese products. There, too, the inflation rate was last measured at a gigantic 139 percent.

However, Zimbabwe is currently in first place in the global inflation ranking with 285 percent. The southern African state gave up its native dollar in 2009 and instead used foreign currencies, primarily the US dollar. In 2019, the government reintroduced the national currency – after which it quickly depreciated. Due to the currency turbulence and extreme inflation, the central bank resorted to a special tool in July: it sold gold coins as a store of value. What you don’t try as an inflation leader.