Ferghana state university "Social and humanitarian sciences" department

Inflation levelling off in the US?
Inflation in the US is beginning to show signs of levelling off. Although it is still high at 7.7% (as of October 2022), this still represented the third successive month in which it had fallen. The drop comes after the Federal Reserve increased interest rates from 3% to 3.75%–4% in a few iterations (and months) as part of its efforts to bring inflation down to its 2% target. Inflation in the US is being driven by the increased cost of housing, food and medical care.
China’s inflation rate has begun to show signs of slowing. Its CPI rose to 2.1% in October 2022. This represents a fall of 0.7 percentage points compared to September 2022 – which was close to the 3% inflation ceiling. Food prices, in particular pork and vegetables, were key drivers of price increases. China’s zero-Covid policy is set to be questioned once more in a bid to stimulate its economy. However, it is unlikely to budge, meaning lower-than-expected GDP growth in the final quarter of 2022 looks likely.
The highest inflation rates in the world
Of the 172 countries analysed by Investment Monitor, 74 had inflation rates in excess of 10%. Three of the ten highest rates are found in Africa, with Zimbabwe having the highest inflation rate in the world at 269%. Argentina and Turkey, detailed above, are the only G20 countries in the top ten globally. Russia, the country with the third-highest inflation in the G20, ranks 54th globally. Countries that are relatively poor, import reliant and politically weak are at more risk of higher inflation levels.
Inflation impact on FDI According to the International Monetary Fund, world inflation is expected to reach 8.8% in 2022 (compared with 2021 prices). It also expects a convergence between advanced and developing economies. Advanced economies are expected to experience a 7.2% annual rise in average consumer prices, while emerging markets and developing economies should see inflation around the 9.9% mark. This gap of 1.7 percentage points is smaller than the corresponding gap in 2008 of 5.9 percentage points.
The expectation is that inflation will negatively impact foreign direct investment (FDI) levels. However, given most countries in the world are experiencing inflation, investors may also want to undertake FDI to reduce exposure in certain markets. The inflationary pressures may also promote FDI in the form of regionalisation – bringing operations closer to consumer markets. On the contrary, operations farther afield may be deemed too costly and nearshoring or closures may occur. Foreign investment will depend on inflation levels in the company’s home country and proposed destination country.
Given the high levels of inflation, it would be unsurprising to see investment promotion agencies further promote stable inflation levels in the short to medium term. Although currently not at the forefront of any investment promotion marketing material, an economy with relatively low inflation could promote economic stability to investors. Stable price levels are almost a given in the site selection process, especially in developed markets. This (now) global issue may change that mindset.
Investors must also judge the expected longevity of rising prices. This may cause overseas expansion to pause in the short term. However, in the medium to long term, inflation will not be as big an issue for cross-border investment. Investors will be closely monitoring government policies to curb inflation. The UK’s Chancellor of the Exchequer, Kwasi Kwarteng, lost his job after the markets reacted badly to his September mini-budget.
The risk of economies falling into a recession will also weigh heavy on investors' minds, at least into the first half of 2023.
Finally, companies may struggle to find the right talent if wages rise in line with, or even get close to, inflation rates.