15 Countries With Highest Interest Rates
In this piece, we will take a look at the 15 countries with the highest inflation rates. For more countries, head on over to 5 Countries With Highest Interest Rates.
The Federal Reserve launched a spree of rate hikes in 2022 amid record inflation, causing stocks to tumble and investors to scramble to get a hold of defensive plays. The Fed shows no intention of completely stopping its rate hikes, despite clear signs of inflation easing worldwide. Analyst warnings on a possible recession hitting the economy sometime in 2023 are now a norm. However, the 2022 rate hikes and their effects on the stock market seem without a precedent in history. This is because comprehensive data by Bloomberg shows that over the past thirty years, the Fed went on a rate hike spree four times, and none of these rate hikes were detrimental to the stock market.
A 2013 report by S&P Global analyzed three periods of interest rate hikes since 1991. The report found out that the S&P 500 rose in all three episodes. Between January 1991 and June 2013, the average monthly return of the S&P 500 was 0.85%, while during the three periods of rising interest rates, the average monthly return of the same index was 0.96%.
Usually it’s believed that the only stocks that gain value during interest rate hikes are banks like Morgan Stanley (NYSE:MS) and Wells Fargo & Company (NYSE:WFC) and oil stocks like Exxon Mobil Corp (NYSE:XOM). However, data from Bloomberg shows that technology was one of the best-performing sectors during these rate-hike cycles.
What's different this time? Perhaps the Russian invasion of Ukraine, a thriving jobs market and supply-chain problems. Only the months to come would tell how the 2022 rate hikes affected the American and global economy.
While interest rates might sound simple, in reality, they are determined through complex mathematical models that factor in a variety of factors such as gross domestic product (GDP) growth, the savings rate of a country, and the total debt issued and taken on by a government. Lower rates increase the ease of doing business. Most companies often incur costs first and earn revenue later. The time difference between these leaves them short of capital to pay for their expenses and this amount, referred to as working capital, is borrowed. Therefore, the lower the interest rates, the easier it is for firms to produce, and they subsequently end up contributing more to the GDP.
Yet, low interest rates come with their caveats. They encourage people to borrow more, which expands the supply of money in the market. More money leads to more product and service consumption. This causes suppliers to increase their supply, which causes them to raise prices to fund their growth and to keep up with demand. The price growth contributes to inflation, and this menace hits the poorest section of society the hardest as prices go up but their incomes stay static.
As is with most things in economics, there are two kinds of interest rates. The first is the nominal interest rate, which is simply the return that a lender earns on their investment. The other is the real interest rate, which subtracts the inflation rate from the interest rate to determine the 'real' interest that a lender is receiving. In short, if your bank pays you 5% annually on a savings deposit, and inflation is 2%, then the real interest rate is 3% while the nominal rate is 5%.
Photo by Sharon McCutcheon on Unsplash
Our Methodology
We took a look at global interest rates to pick out which countries' central banks have the highest interest rates. As you'll find out below, these rates are often accompanied by years of economic mismanagement or radical policies.
Countries With Highest Interest Rates
15. Federal Republic of Nigeria
Interest rate as of November 2022: 16.5%
The Federal Republic of Nigeria is a West African country. It is one of the most diverse countries in the world, with a multi-ethnic population. Additionally, it has the largest economy in Africa, which was worth $1.1 trillion last year. The economy is fueled by the services industry, with sizeable contributions from both manufacturing and agriculture as well. The Federal Republic of Nigeria's interest rate sits at 16.5%. However, the Nigerian people have also been battling with painful inflation, which stood at a stunning 21% in October.
14. Republic of Kazakhstan
Interest rate as of November 2022: 16.75%
The Republic of Kazakhstan is a Central Asian country. It is a former Soviet Union country that gained independence in 1991, becoming the last Soviet republic to do so a mere ten days before the Soviet Union was dissolved. It is the largest landlocked country in the world, and it also contributes the bulk of the Central Asian GDP. Its GDP was worth $596 billion this year and was fueled by the services industry. The interest rate in the Republic of Kazakhstan is 16.75%. Yet its inflation sits at 19.6%.
13. Republic of Sierra Leone
Interest rate as of November 2022: 17%
The Republic of Sierra Leone is a West African coastal country. It was founded by the British Crown in 1808, and gained independence from the British Empire in 1961. The country is known for its mineral exports, particularly conflict diamonds, which are referred to as blood diamonds in common parlance. The Republic of Sierra Leone's economy was worth $12.38 billion in 2018 with GDP per capita sitting at $1,616 during the same time period. Its interest rate is 16.75% and inflation is a stunning 29.1%, the sixth highest in Africa.
12. Republic of Haiti
Interest rate as of November 2022: 17%
The Republic of Haiti is an island nation in the Atlantic Ocean. It is one of the most politically unstable countries in the world and has undergone 32 military coups since gaining independence and has seen several of its leaders assassinated in bloody political battles. The country's GDP stood at a mere $19 billion in 2020, ranking it at 143 globally. During the same time period, the Haitian GDP per capita was $1,728. The Republic of Haiti's interest rate sits at 17%, but its inflation is 30.5% as of July 2022.
11. Republic of Mozambique
Interest rate as of November 2022: 17.25%
The Republic of Mozambique is a Southeastern African country that gained independence from Portugal in 1975, after fighting for its freedom. The country is one of the poorest in the world and consists mostly of Black Africans. It is also one of the 39 countries that are part of the International Monetary Fund's (IMF) heavily indebted poor countries (HIPC) list. The Republic of Mozambique's government debt has often accounted for more than its GDP, but the country has navigated these storms with the IMF's help. Its interest rate is 17.25% and inflation sits at 11.83%.
10. Republic of Malawi
Interest rate as of November 2022: 18%
The Republic of Malawi is a landlocked African country that was colonized by the British Empire in 1891. The country gained its independence in 1964. The Malawian GDP was worth $25 billion in 2019 and its GDP per capita was among the lowest in the world as it sat at $1,240. The country's exports stood at $1.4 billion in 2017, and it relied on the agriculture sector to earn its foreign exchange. Like other poor countries, the Republic of Malawi's government debt has consistently stood at double digit percentages of the GDP. Its interest rate is 18% and inflation is 26.7% - one of the highest in the world.
9. Islamic Republic of Iran
Interest rate as of November 2022: 18%
The Islamic Republic of Iran is a Western Asian country that is one of the most culturally significant countries in the world. The Islamic Republic of Iran's interest rate is 18% and its inflation is one the highest in the world at 52%.
8. Republic of Angola
Interest rate as of November 2022: 19.5%
The Republic of Angola is the second largest country in Africa located on the Southwestern coast. The country gained independence from the Portuguese in 1975. The country thrives due to its vast natural resources, that consist primarily of diamond and oil - two of the world's most valuable minerals. The economy was worth $203 billion in 2019, with a $6,752 GDP per capita. The Republic of Angola's interest rate sits at 19.5% as of November 2022, and its inflation is 16.68%.
7. Republic of Moldova
Interest rate as of November 2022: 20%
The Republic of Moldova is a landlocked Eastern European country that is a former territory of the Soviet Union. It gained independence from communist rule in 1991 and since then has struggled to recover from the economic after effects. The Moldovan GDP stood at $42 billion in 2022, with a GDP per capita of $16,483. Due to low levels of industrialization, services contribute the largest GDP chunk, and the country primarily relies on agriculture and food for exports. The Republic of Moldova has an interest rate of 20% and its inflation is a whopping 34.62% - the highest for any European country.
6. Ukraine
Interest rate as of November 2022: 20%
Ukraine is the second largest European country and a former Soviet state. It gained independence in 1991, after losing millions of lives under Soviet rule. Ukraine has also dominated headlines in 2022, due to the brutal invasion of Russia which is seeking to annex its territories. The war has upended global markets and caused meteoric inflation all over, alongside inflicting massive losses of life. Ukraine's interest rate sits at 20% and the country is also battling 26.6% inflation.
The rise in interest rates in 2022 have put stocks like Morgan Stanley (NYSE:MS), Wells Fargo & Company (NYSE:WFC) and Exxon Mobil Corp (NYSE:XOM) into the limelight.
Click to continue reading and see 5 Countries With Highest Interest Rates.
Suggested Articles:
Disclosure: None. 15 Countries With Highest Interest Rates is originally published on Insider Monkey.
