How Global Inflation Impacts Developing Countries.

Global inflation is a big problem that affects countries all over the world, but it hits developing countries the most. Inflation leads to an increase in prices, making life more difficult while also increasing poverty rates and declining economic growth.

Generally speaking, the term Inflation is when prices go up and the value of money goes down. For example, you’re at the grocery store with $12; buying milk, eggs, and vegetables. Right now, it might cost you $9.05, but if you go back 10 years, those same groceries might’ve only costed you $7.10. So in the span of 10 years, the price went up by $2.05 because of inflation and thus increasing the cost of life for citizens.

So how is this example related to the impact of developing countries?

Well, this is exactly what’s happening to under privledged countries, but in a much larger scale. In these countries, inflation causes the prices of everyday things like food, medicine, and transportation to significantly increase. For families already struggling to get by, it becomes even harder to afford basic needs. For example, when the price of food goes up, families might not be able to buy enough to feed themselves, leading to a rise in poverty and world hunger rates.

Inflation not only increases stock price, but it also reduces the value of money, meaning that even with higher pay, struggling families still can’t afford basic needs. As a result, the country’s exchange rate drops, making its country’s wealth even worse.

As the exchange rate falls, it can lead to capital outflows as investors seek to protect the value of their assets. These capital outflows can, in turn, cause a further fall in confidence and more pressure on the exchange rate.

(Pettinger, 2022)

These declines in exchange rates won’t just cause havoc for the economy, but they’ll also affect real life too. People in cities might start protesting and striking because they want better pay, and lower prices. Some might even commit stealing just to make ends meet. This will lead to higher crime rates, and it could cause political tension both inside the countries and around the world.

So if we know that all of this may happen due to inflation, why cause inflation in the first place?

Inflation is mainly done either accidental or on purpose. When inflation is caused on purpose, it is due to encouraging people in investing more in stock. If prices go up, people will be motivated to invest their money in businesses, thus providing an active economy and growth in corporations.

Moreover, when inflation is caused accidently, it is mainly due to the lack of control because of bad policies or unexpected events; like printing too much money, wars, or natural disasters that cut supplies short. Governments and central banks try to control inflation so it doesn’t get too high or fall too low.

In conclusion, inflation has a huge impact worldwide, but it affects developing countries the hardest. If inflation keeps rising, it’s likely that we’ll see more strikes and chaos breaking out around the world in the future.

Work cited:

Pettinge, Tejvan. “The impact of inflation in developing economies”, Economics Help, www.economicshelp.org, 23, Feb. 2022, https://www.economicshelp.org/blog/167817/economics/the-impact-of inflation-in-developing economies/#:~:text=High%20inflation%20in%20a%20developing,the%20value%20of%20their%20assets.