The impact of global inflation on the economies of developing countries is very complex and varied. Global inflation, which is often triggered by factors such as political instability, spikes in raw material prices, and changes in monetary policy in developed countries, will have a direct effect on economic stability in these countries. One of the main impacts of global inflation is the increase in raw material costs. Developing countries often depend on imports for raw materials and consumer goods. As global inflation pushes the prices of these goods up, local providers must face the prohibition of higher costs, which can lead to increased prices of domestic goods and services. This creates problems for residents who have a fixed income, resulting in a decrease in purchasing power and an increase in poverty rates. Furthermore, global inflation has the potential to influence monetary policy in developing countries. In response to rising inflation, the central bank may decide to raise interest rates. Higher interest rates can slow investment and consumer spending, creating a negative impact on economic growth. On the other hand, if countries are too slow in raising interest rates, they risk facing hyperinflation that could undermine the economic order. What is also no less important is the impact it has on currency exchange rates. High inflation in developed countries can cause capital outflows from developing countries, because investors tend to look for more stable assets. Depreciation of the exchange rate can worsen domestic inflation by increasing the cost of imports, thereby creating a more severe inflation cycle. The agricultural sector in developing countries can also feel the effects of global inflation. The increase in prices of fertilizers and agricultural raw materials produced globally can affect production results, which in turn can increase food prices. This could lead to a food crisis, with long-term impacts on public health and social stability. Foreign direct investment (FDI) may also be affected. When global inflation increases, investors tend to be more careful. Reluctance to invest can slow economic growth and reduce employment opportunities for local residents. Countries with already fragile investment environments may face greater challenges. Apart from that, economic uncertainty caused by global inflation can also trigger political instability. People who feel economic pressure tend to be more vocal and involved in protests, which can lead to social unrest. Political stability is a crucial factor in economic conditions, and when citizens feel the direct impact of inflation, the government’s legitimacy is often questioned. Finally, to overcome the impact of global inflation, developing countries must first strengthen foreign exchange reserves and create various social protection schemes to protect their citizens. Entrepreneurship and innovation education is also important to create long-term economic resilience. These strategies can help developing countries be better prepared to face future global inflation shocks.
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