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Venezuela marks its fourth year as the world's most miserable economy

Bloomberg/ 15 Feb 18 | 09:22 PM

A woman selects goat cheese from almost empty refrigerators at a supermarket in the Venezuelan captial Caracas. (Photo: Reuters)

Rising prices are more of a threat to the global economy this year than joblessness, according to Bloomberg’s Misery Index, which sums inflation and unemployment outlooks for 66 economies.

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Venezuela marks its fourth year as the world’s most miserable economy, with a score that’s more than three times what it was in 2017. Thailand again claimed “least miserable" status, though the nation’s unique way of calculating unemployment makes No. 2 Singapore worth noting. Elsewhere, Mexico looks to make big strides this year as inflation becomes more manageable, while Romania absorbs more misery for the opposite reason.

The Bloomberg Misery Index relies on the age-old concept that low inflation and unemployment generally illustrate how good an economy’s residents should feel. Sometimes, of course, a low tally can be misleading in either category: Persistently low prices can be a sign of poor demand, and too-low joblessness shackles workers who want to switch to better jobs, for instance.

The results largely signal a global economic outlook that remains bright overall: Economists are penciling in 3.7 per cent year-on-year growth for the world in 2018, matching last year’s pace that was the best since 2011, according to the Bloomberg survey median.

Some have not been so fortunate. In Venezuela, hyperinflation has left many economists throwing up their hands at the actual rate of price growth. Black-market currency rates have provided an angle on the numbers, while alternative measures have chased daily cost swings. A recent government slashing of grocery prices gave a brief reprieve to inflation, while the surveyed economists see it rising 1,864 per cent this year.

It’s anyone’s guess: The International Monetary Fund’s latest estimate has that figure at 13,000 per cent for this year after about 2,400 per cent in 2017.

Romania also is heading in the wrong direction. Economists see a 3.3 per cent inflation rate for 2018 after much more subdued price growth last year, pushing its misery down 16 notches, to number 34. The National Bank of Romania is chasing inflation with interest-rate hikes, aiming to stay ahead of any overheating while growth surges on ballooning government spending.

At the other end of the spectrum, Mexico makes the biggest progress this year, moving 16 notches toward “least miserable" as economists remain optimistic that the central bank will be able to tame last year’s bout of high inflation, bringing it to an average 4.1 per cent this year after 6 per cent in 2017. Unemployment is set to remain around 3.4 per cent.

Two caveats here: Mexico’s jobless figures don’t take into account the 60 per cent or so of workers who are in the informal economy. And despite this year’s improvement, consumer confidence remains in a funk and Nafta negotiations might not see a happy ending.

Malaysia moves down the misery scale to number 52 from number 43 due to moderating inflation. The tepid price growth is allowing Bank Negara Malaysia to be patient with interest-rate hikes, even as they were first in the region this year to tighten this year

South Korea and Norway, which also happened to perform well in the Bloomberg 2018 Innovation Index at number 1 and number 15, broke into the top-10 least miserable countries. 

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