Economy

8 Nations Facing Sky-High Interest Rates and Inflation

Economic headlines about Turkey are quite dire after its equity market is down about 50%. The top video and news searches cite that Turkey’s economy will struggle to get back on track (Bloomberg) and that U.S. sanctions are not the only thing hurting Turkey (CNBC). The Asia Times even noted that Turkey is heading blindly toward stagflation, an unlucky period of poor growth but where inflation keeps prices rising. And the IMF projects that the total amount of Turkish debt that is payable in foreign currencies has risen to over 50% of Turkey’s GDP.

Turkish President Erdogan has blamed an economic war with the United States with tariffs. Turkey’s central bank is also run by Erdogan’s son-in-law. Turkey’s leadership has even accused Western credit rating agencies of deliberately attempting to undermine its banking sector after warnings from Moody’s and Fitch.

Ukraine

Coverage of Ukraine in the international press has been more tempered than in the prior years, now that Crimea and Russia are less frequently in the breaking news about Ukraine. The nation has roughly 44 million people, and the CIA World Factbook lists the 2017 GDP at $368.8 billion. It was also noted that the Ukrainian Republic was the second most important economic component of the former Soviet Union, and that it accounted for more than one-fourth of Soviet agricultural output.

Losing Crimea in 2014 also was said to have helped its economy contract by 6.6% in 2014 and by 9.8% in 2015, and GDP has yet to handily recover. The National Bank of Ukraine raised its key policy rate by 0.5% in July to a whopping 17.5%, and the June 2018 reading on inflation was roughly 9.9%. Statista projects 11% inflation in 2018 but sees single-digit inflation in the coming years.

Venezuela

The situation in Venezuela has been dire for years, and the solution seems to be perpetually elusive. The World Bank’s last reported official lending rate was almost 21.1%, but that was back in 2017. TradingEconomics shows Venezuela’s most recent interbank rate as 22.49%, and the benchmark interest rate was last recorded at 20.81%.

It turns out things are so bad in Venezuela that the actual economic numbers are a guess at present. Venezuela’s President Maduro has ordered the nation’s banks to adopt a new petro cryptocurrency in place of the bolivar. The cryptocurrency news site CCN has pointed out that Venezuelans already had taken its chances with government laws preventing bitcoin so that it could preserve its wealth, and in March President Trump banned American citizens from buying Venezuela’s petro cryptocurrency in an executive order.

And Elsewhere

It is a rather sad state of affairs to note that these eight nations are not anywhere close to the end of the list of nations suffering from high interest rates and inflation. There have been many unfortunate currency issues coinciding with the United States continuing to raise interest rates, but imagine how bad things might be around the developing world if the U.S. economy was weaker as well.

Nations like South Africa and other African nations face serious economic woes from their own governing policies. Indonesia, Uzbekistan, Georgia, Kazakhstan and many other nations could all fall into the category of nations suffering under high interest rates, inflation and troubled economies.

The picture becomes quite visible in emerging markets when there are numerous country-specific exchange traded funds (ETFs) that have fallen by 10%, 20% and even close to 50% in 2018 alone.

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