Inflation is a disease that can wreck a society, Milton Friedman, the late Nobel laureate economist, once said. Add rising unemployment to the diagnosis, and his profession ascribes a rather non-technical term to the debilitating effect on people: misery.
That affliction this year will be most acute in Venezuela, Argentina, South Africa, Ukraine and Greece — the five most painful economies in which to live and work, according to Bloomberg survey data that make up the so-called misery index for 2015. (It’s a simple equation: unemployment rate + change in the consumer price index = misery.)
In Ukraine’s case, war will exact greater economic casualties. Tension with Russia-backed rebels will prolong joblessness in the eastern-European nation, and inflation won’t offer much relief, the surveys showed. The one-two punch means Ukrainian consumers are set to be the fourth-saddest among 51 economies (including the euro area) based on forecasts for the misery measure.
Adding to the agony is the relatively abysmal income growth that will fail to cushion Ukrainian households against the still-surging prices. At $8,494 gross domestic product per capita this year, Ukraine only edges out the Philippines among the countries surveyed and measured with the International Monetary Fund’s proxy for resident income.
Unemployment probably will climb to 9.5 percent in Ukraine this year from its 8.9 percent rate as of the third quarter in 2014, the survey data show. Inflation is projected to rise at a 17.5 percent pace in 2015, compared with the 24.9 percent December year-over-year rate.
The depressing expectations for Ukraine still aren’t quite as bad as what the embattled nation faced in 2014, when it finished second in the misery index. The 2015 projections, dismal as they are, would make Ukraine bright enough to jump past South Africa and Argentina from last year’s misery-index readings.
The three countries that will probably see the most economic misery in 2015 — South Africa, Argentina and Venezuela — haven’t budged much from their 2014 rankings, when they occupied three of the top four spots, the data showed.
At 78.5 percent, the estimated CPI inflation rate in back-to-back, most-miserable Venezuela more than quadruples Ukraine’s inflation rate. The dire shortage of basic goods in Venezuela last week prompted neighboring Trinidad & Tobago to offer a tissue paper-for-oil swap.
Five years after investors popularized the term “PIIGS” to describe a handful of European countries with bloated budget deficits, four of those five countries remain in dire straits, according to their projected misery indexes.
Greece is 5th, Spain is 6th, Portugal is 10th and Italy is 11th in this year’s ranking, though each show about average projected income levels relative to survey peers. (Ireland happily sits further down the chain at No. 16 in the misery ranking and with a much-better-than-average GDP per capita of $48,787. The 51 economies in our misery index average GDP per capita of $31,079.)
Enough of the sad news. For the glass-half-full take, stay tuned for our take on the most consumer-friendly economies in 2015.
Note: Figures reflect the latest research, private forecasts and survey data compiled by Bloomberg as of Feb. 27.