Think Americans Have It Bad? Here’s How Inflation Is Affecting Other Countries

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No country in the world has escaped the pandemic unscathed. 

Inflation hurts. Prices soar, your dollars don’t stretch, and your bank account balance shrinks. Although it’s true, it does not help the situation to remind ourselves that inflation — and then getting that inflation under control — is part of the economic cycle.

In an overly-simplified nutshell, inflation occurs when demand is greater than supply. Let’s say a new type of television comes on the market that fully immerses the viewer in the experience, sort of a cross between TV and virtual reality. It’s a new product, and there is relatively little supply. Due to the lack of supply, the price people are willing to pay to have the new television goes through the roof. That’s inflation.

There’s no denying that inflation hit us hard last year, with prices rising 7.7% over the previous year. And we weren’t alone. According to Pew Research, analysis of data from 44 advanced economies shows that consumer prices have risen substantially since the days prior to COVID-19.

Misery loves company?

The point of this article is not to revel in the pain experienced by others. It’s more about understanding that specific situations, like a pandemic or war in another country, impact us all.

A note as we begin: Each country calculates its inflation rate in a slightly different way. Due to that fact, this is not an apples-to-apples comparison.

United Kingdom

Inflation in the United Kingdom hit a 41-year high of 11.1% in 2022. By October, households were paying, on average, 88.9% more for necessities like electricity and gas. Food and non-alcoholic beverage prices jumped by 16.4%, and the country faces its longest recession on record.

Italy

Italy has also been hit hard, with a year-over-year inflation rate of 11.8%. Energy prices have risen at a rate of 38.3%, due largely to the Russian invasion of Ukraine. The jump in price is not surprising, given that Ukraine previously supplied most of Europe’s natural gas supply.

To make matters worse for Italian citizens, Italy is the only country in the EU where wages have declined over the past decade. Furthermore, unemployment is at an all-time high, with Italian youth being hit the hardest. The unemployment rate for young Italians is 21.2%.

In an effort to prevent more Italians from falling into poverty, the government has extended bonuses to low and middle-income citizens, including migrants.

Poland

With an inflation rate of 17.9%, Poland is on the verge of a deep recession. It is rare for a Polish citizen to land a fixed interest rate, so interest on existing loans have risen, making it even more difficult for households to cover expenses.

Approximately 1.6 million Poles live below the subsistence level. To put that in perspective, a one-person household with an income of $145 per month or less is considered to be below the subsistence level.

And it doesn’t look like things are going to improve anytime soon. According to the president of the Polish Development Fund, a recession in Germany and Italy is likely to splash over into the Polish economy, worsening both unemployment and public debt.

Sweden

Not only did Sweden experience a year-over-year inflation rate of 10.9% in 2022, but economic prediction calls for 2023 to be another rough year. At the heart of the issue are rising interest rates and the impact of the war in Ukraine on natural gas prices.

Like other countries facing economic hardship, overall consumer and business sentiment remains low.

Egypt

Also impacted by the pandemic and war in Ukraine is Egypt, with a year-over-year inflation rate of 16.2%. And even though the interest rates in Egypt were among the highest in the world before the war in Ukraine, they’ve increased even more.

Working class families in Egypt have been hit especially hard as the price of staples like bread, rice, and sugar have increased. Even nuts are now considered a luxury item. Small businesses are also struggling because they can no longer afford to stock their shelves.

In America, we wait to see if a recession will occur and if the Federal Reserve can manage to rein in inflation. Other economies around the globe face similar issues. While there’s no comfort in that, it does underscore just how intertwined the global economy is.

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