In this piece, we will take a look at the 20 countries with the lowest inflation rates in the world. If you want to skip our analysis of the current global macroeconomic environment and why inflation has become one of the hottest topics over this past year, head on over to 5 Countries With Lowest Inflation Rates In The World.
Inflation is the bane of existence for governments, economists, business people, and ordinary people. Politicians hate it because it costs them votes, economists hate it because it becomes hard to control, and the remainder hate it because it can cause a rapid deterioration of wealth and make living difficult.
Yet, inflation has become a global problem these days. While it is on a downward trend from the peaks of last year, the rate of price increases is yet to fall to levels that are considered stable. The initial bout of inflation came in late 2021 as the money sloshing in the economy due to stimulus spending during the coronavirus pandemic rapidly increased purchasing powers. However, central banks around the world believed that this would be transitory and disappear once the cash was spent. Yet, reality, always ready to shock, struck back hard in the form of the Russian invasion of Ukraine. The invasion caused a rapid spike in crude oil and commodities prices, and as these made their way into the economy, prices continued to rise.
But just how fast was this pace of increase? Well, in the U.S., inflation first started to rise in August 2020 but the jump remained below the Federal Reserve’s target of 2%. However, a year later the picture would dramatically changed, as during August 2021, the reading stood at 5.25% – well above the target. At the time though, officials at the Federal Reserve believed that this would be transitory, a costly mistake that would manifest itself later on. Inflation would go on to peak in America at a stunning 9% in June 2022 – at a time when the Fed would have started to aggressively increase interest rates in large chunks of 75 basis points. Since then though, inflation has come down in America, but the same isn’t the case in other regions of the world.
Another developed country that was one of those hit hardest by inflation is the United Kingdom. While America does not rely significantly on global commodities and energy markets due to ample natural resources, the U.K.’s fortunes are tied closely, especially to the price of natural gas. And the turmoil ushered in due to the Ukraine invasion dealt a heavy blow to Britain. At a time when Americans were facing 9% inflation, the British were battling a 9.4% rise. Yet, even as U.S. inflation would peak there, inflation in the U.K. would go ahead and further rise to 11.10% in October 2022 before starting a downward trajectory. In Britain though, the latest inflation data for May 2023 shows that it remained at 8.7% from April but in a small respite, it did mark a small drop from the 9.1% in May 2022.
However, in what might be a great indicator of good news for the U.K. down the road, the producer price index (PPI) significantly dropped. What is typically called inflation is the consumer price index (CPI) and it measures the changes in prices that the consumer has to face. On the other hand, the PPI is further upstream in the supply chain. It measures the prices that goods producers receive, and if this metric drops, then there is a greater likelihood of the CPI falling as well. PPI in the U.K. rapidly dropped year to date on May 2023 to 0.5% from a painful 4.2% earlier with the 0.5% reading being less than half of expectations of 1.2%. At the same time, input and output prices actually fell during May, for a wholesome data set release that really appears to be a strong predictor of what might be in store for inflation.
Globally, the International Monetary Fund (IMF) expects that inflation will fall to 2.9% this year but jump to 3.1% in 2024. It adds that the fight of central banks against price increases, primarily in the form of interest rate hikes, will also impact global economic growth. The impact of high interest rates due to high inflation along with other factors on the global economy can be quantified if the World Bank’s estimates are considered. The global body believes that the global economy’s growth can potentially fall to a thirty year low by 2030 to sit at 2.2% in the aftermath of the economic shocks due to the coronavirus pandemic and the Russian invasion of Ukraine.
When it comes to analyzing leading signals of inflation, retailers are among the first to pick up whether prices are increasing or decreasing. On this front, here’s what the management of Walmart Inc. (NYSE:WMT) had to say during its fourth quarter of fiscal 2023 earnings conference:
For the first quarter, we expect to see a higher rate of sales growth of 4.5% to 5%, largely due to inflation. We expect operating income to increase 3.5% to 4%, including the negative impact of a LIFO charge of approximately 235 basis points. EPS is expected to be in a range of $1.25 to $1.30, including an approximate $0.03 headwind from LIFO. While we’re not providing quarterly guidance beyond Q1, I want to offer the following perspective.
We currently expect sales growth to be strongest in the first half then moderating in the second half, reflecting our macro assumptions and a more difficult year-over-year comparisons. Because we will lap the benefit we received last year from insurance proceeds in 2Q, we expect operating income to be flat in 2Q relative to last year. We expect operating income growth to begin to outpace sales growth to a greater degree in the second half of the year versus the first half. In closing, I want to echo Doug’s Sentiment on our business. Over the last year, our team responded to some of the external challenges with the speed and nimbleness rarely seen in a company of our size and we exited the year in a much, much better place. As I reflect on where we are today, I’m more excited about our future than at any point in my time here.
With these details in mind, let’s take a look at countries with the lowest inflation in the world. If you want to find out about the countries that were the hardest hit by inflation, head on over to 15 Countries with the Highest Inflation Rates.
Our Methodology
To compile our list of the countries with the lowest inflation, we used data from Trading Economics as a reference point. However, each entry was individually verified to ensure accuracy and updated when needed. When details from central banks or statistical authorities were unavailable, those from the IMF were relied upon as a last resort. As the list is only about countries with the lowest inflation, disputed territories and others are excluded.
20 Countries With Lowest Inflation Rates In The World
20. Kingdom of Denmark
Latest Inflation Estimate: 2.9%
The Kingdom of Denmark is a prosperous Nordic European country. Its inflation fell from 5.3% in April, bolstered by a drop in electricity prices.
19. Kingdom of Saudi Arabia
Latest Inflation Estimate: 2.8%
The Kingdom of Saudi Arabia is the world’s largest oil exporter which often manages to stave off economic turmoil due to constant petrodollars
19. Republic of Ecuador
Latest Inflation Estimate: 2.5%
The Republic of Ecuador is a South American country with a coast to the Pacific Ocean. It has a $115 billion economy and a GDP per capita of $6,413.
17. Socialist Republic of Vietnam (SRV)
Latest Inflation Estimate: 2.4%
The Socialist Republic of Vietnam (SRV) is a Southeast Asian nation with a $449 billion economy. Inflation dropped to 2.4% in May 2023 from 2.8% in April.
16. Russian Federation
Latest Inflation Estimate: 2.24%
Russia is the largest country in the world in terms of area. Its inflation, according to the central statistics office is 2.24% as of May 20, 2023.
15. Swiss Confederation
Latest Inflation Estimate: 2.2%
The Swiss Confederation is a European nation that is an important hub in Europe for banking and finance.
14. Principality of Liechtenstein
Latest Inflation Estimate: 2.2%
The Principality of Liechtenstein is one of the smallest countries in the world. It is located in the Alps mountains of Europe and has a whopping GDP per capita of $180,000 – the highest in the world.
13. Kingdom of Bahrain
Latest Inflation Estimate: 2.2%
The Kingdom of Bahrain is an island nation country. One of the smallest nations in the world, it has a $44 billion economy.
12. Republic of Fiji
Latest Inflation Estimate: 2%
The Republic of Fiji is an island country in the Pacific Ocean. Like several other countries, it saw inflationary pressures drop in March 2023, when the reading stood at 2% from an earlier 4.7% in March 2022.
11. Hashemite Kingdom of Jordan
Latest Inflation Estimate: 1.96%
The Hashemite Kingdom of Jordan is a Western Asian country. While overall inflation jumped by 1.96% in May 2023, sectors such as rent and transportation accounted for higher increases.
10. Republic of Seychelles
Latest Inflation Estimate: 1.8%
The Republic of Seychelles is an African nation. Its central bank is quite optimistic about slowing inflation this year, and the figure for May 2023 was 18%.
9. Georgia
Latest Inflation Estimate: 1.5%
Georgia is a European and Asian country. While its headline inflation rate dropped to 1.5% in May, core prices remained elevated at 3.9%, and annual inflation is expected to sit around 3%
8. Burkina Faso
Latest Inflation Estimate: 1.5%
Burkina Faso is a West African landlocked country with a small $18 billion economy.
7. Republic of Armenia
Latest Inflation Estimate: 1.3%
The Republic of Armenia is a landlocked Asian country. It is one of the smallest nations in the world in terms of area and has an economy worth $23.7 billion.
6. Sultanate of Oman
Latest Inflation Estimate: 0.91%
The Sultanate of Oman is a Middle Eastern country. It has a $110 billion GDP and a relatively high GDP per capita of $23,416.
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Disclosure: None. 20 Countries With Lowest Inflation Rates In The World is originally published on Insider Monkey.
