Authored by Steve H. Hanke, Professor of Applied Economics at Johns Hopkins University. Follow him on Twitter @Steve_Hanke.
Each day, I accurately measure inflation for countries experiencing elevated inflation rates using high-frequency data and the principle of Purchasing Power Parity. Below is my list of countries suffering from inflation rates above 25%/yr.
The uncertainty and volatility in the financial markets is having a significant effect on foreign exchange rates. With COVID-19 causing economic panic across the globe, unstable currencies, like those below, are facing amplified effects as their values plummet. Since the pandemic began, Lebanon, Brazil, Iran, Libya, and Nigeria have joined the club of countries with inflation exceeding 25%/yr.
1) Venezuela - Inflation Rate of 2,553%/yr
Venezuela holds down the top spot on my list, with an annual inflation rate of 2,553%/yr. Note that my MEASUREMENT of the implied inflation rate is accurate and much lower than the widely reported International Monetary Fund’s (IMF) FORECAST. Also note similar wide discrepancies between my accurate measurements and the IMF’s forecasts for Zimbabwe and Lebanon. It’s important to remember that while I can MEASURE elevated inflation rates with great accuracy, no one can FORECAST their durations or magnitudes. Nevertheless, the IMF routinely attempts the impossible: to FORECAST inflation in high-inflation environments.
2) Zimbabwe – Inflation Rate of 999%/yr
In over three months since COVID-19 first hit Zimbabwe, Zimbabwe has been rocked by drought, starvation, and, now, cyclone Idai. Zimbabwe’s current crisis is marked by soaring inflation in conjunction with shortages of food and medical supplies. Fuel prices rocketed up this week, from ZW $28.86 to ZW $71.62, a 150% increase.
3) Lebanon – Inflation Rate of 363%/yr
Protests erupted across Beirut once again due to the spiraling pound and inefficient government. Inflation soared over 300%/yr this week, by my measure. The Lebanese are left with worthless currency. The pound has continuously depreciated throughout the week, reaching a high exchange rate of 7,000 LBP per USD in the black market (read: free market). To end Lebanon's currency crisis once and for all, Lebanon should adopt a currency board.