Global inflation has a significant impact on developing economies, which are often more vulnerable to economic fluctuations. When global inflation increases, the prices of goods and services also increase, thereby affecting people’s purchasing power. Developing economies usually rely on imports of raw materials and consumer goods. With high import costs due to global inflation, economic instability may increase. One of the first impacts of global inflation is an increase in the cost of living. In developing countries, where a large proportion of the population relies on low incomes, inflation causes shifts in consumption patterns. People tend to reduce spending on non-essential goods, switching to cheaper or substitute products, which in turn can affect real sector growth. Furthermore, global inflation also has implications for monetary policy. Central banks in developing countries may be forced to raise interest rates to contain inflation. This increase in interest rates could result in a decrease in investment, because borrowing costs increase. Sovereign bonds and business bonds have become more expensive, making it difficult for companies and governments to obtain the financing needed for development projects. On the other hand, global inflation can cause economic uncertainty, leading to a decline in investor confidence. When foreign investors see the potential for increased risk, they may withdraw direct investment, causing capital flight. This situation can worsen local currency exchange rates, which in turn exacerbates inflation. Governments in developing countries also face challenges in terms of fiscal policy. To help affected communities, they may need to increase social spending, potentially increasing the budget deficit. In this difficult situation, financing from international institutions such as the IMF and World Bank is very important. The agricultural sector, which is often the backbone of the economies of developing countries, is also not immune from the impact of global inflation. Fluctuations in food prices can affect domestic food security. When food prices rise, more people are pushed into poverty, exacerbating social problems. International trade was also affected by inflation. Developing countries that depend on commodity exports must compete with rising production costs. This could result in a loss of market share, as developed countries with better infrastructure can offer more competitive prices. Finally, infrastructure and sustainable development become hampered amidst global inflation. Important projects that should be aimed at advancing the economy are often postponed or cancelled. Thus, global inflation creates complex and multi-layered challenges for developing economies, triggering an urgent need for effective adaptation and mitigation strategies.
