The consumer price index is a useful measure that looks at changes in the cost of a typical ‘basket of goods’ from one year to the next. It is an estimate of inflation for a particular country over a year. If you are on a fixed income, keeping a close eye on inflation is an important activity that you will need to monitor especially if you are retiring abroad on a very tight budget.

For example, a country with a Consumer Price Index of 1.0 can be thought of as a country with low inflation. In 2006, if a basket of goods cost $100, in 2007 that same basket of goods would cost $101. On the other hand, if the CPI is 5.0, then in 2007, the basket of goods would cost you $105. Thus, in addition to variations in the foreign currency exchange rate, the consumer price index for your retirement destination will also affect the purchasing power of your pension from one year to the next.

If you plan to retire abroad and your retirement income is fixed over time and if your overseas retirement budget is very tight, then it will be worthwhile to evaluate the effects of inflation in your retirement destination.

Low Consumer Price Index: Countries With a Low Inflation Rate (CPI less than 2.0)

There is no clear pattern in terms of which countries fall into this category. Japan is an example of a highly developed country, whereas Mali is on the opposite end of the economic development scale. Although it is hard to make generalizations about countries in this category, it is at least reasonable to say that the effects of inflation on your retirement income in these countries is relatively low.

In a country where the Consumer Price Index is 2.0, it will take about 35 years for the cost of a basket of groceries to double. If the price of a basket of groceries is $100 in the year 2000, it will rise in price to $200 by the year 2035, if everything remains constant.

• Japan:0.1 (price of the basket of goods doubles every 700 years)
• Brunei Darussalam:0.1
• Niger:0.1
• Israel:0.5
• Norway:0.7
• Switzerland:0.7
• Papua New Guinea:0.9
• Cameroon:0.9
• Togo:1.0 (price of the basket of goods doubles every 70 years)
• Malta:1.3
• Benin:1.3
• Mali:1.4
• France:1.5
• Netherlands:1.6
• Denmark:1.7
• Belgium:1.8
• Italy:1.8
• Peru:1.8
• Côte d’Ivoire:1.9
• Hong Kong, China (SAR):2.0
• Malaysia:2.0 (price of the basket of goods doubles every 35 years)
• Morocco:2.0

Moderate Consumer Price Index: Countries With a Moderate Inflation Rate (CPI 2.1- 4.0)

There is a relatively large number of developed countries in this category, including the United States with a Consumer Price Index of 2.9. On the other hand, the list also includes developing countries like the Philippines (my personal retirement destination) which has a comparable Consumer Price Index of 2.8. The difference in the inflation rate between these two countries is fairly minimal so it was not a major concern to me. The lower cost of living in the Philippines gave it a distinct advantage to retirement in the United States.

With a Consumer Price Index of 2.9, the cost of a basket of goods doubles every 24 years. So, if a basket of goods cost $100 in the year 2000, it will rise to $200 in the USA in the year 2024. With a Consumer Price Index of 4.0, the price will double in about 18 years.

• Canada:2.1
• Germany:2.1
• Singapore:2.1
• Gambia:2.1
• Sweden:2.2
• Austria:2.2
• Thailand:2.2
• Australia:2.3
• Luxembourg:2.3
• Ecuador:2.3
• Belize:2.3
• New Zealand:2.4
• Cyprus:2.4
• Poland:2.4
• Finland:2.5
• Korea (Republic of):2.5
• Bahamas:2.5
• Saint Lucia:2.5
• Congo:2.7
• Spain:2.8
• Portugal:2.8
• Slovakia:2.8
• Philippines:2.8
• United States:2.9 (price of the basket of goods doubles every 24 years)
• Greece:2.9
• Czech Republic:2.9
• Croatia:2.9
• Albania:2.9
• Dominica:3.1
• Tunisia:3.1
• Libyan Arab Jamahiriya:3.4
• Macedonia (the Former Yugoslav Rep. of):3.5
• Algeria:3.5
• Slovenia:3.6
• Brazil:3.6
• Syrian Arab Republic:3.9
• Barbados:4.0 (price of the basket of goods doubles every 18 years)
• Mexico:4.0
• Vanuatu:4.0

High Consumer Price Index: Countries With a High Inflation Rate (CPI 4.1-6.0)

The majority of countries in this category are developing countries with the exception of Ireland and the United Kingdom. The inflation rate in these countries are relatively high with the price of goods doubling every 12-14 years.

These may not be ideal retirement destinations if the inflation rate doesn’t change and if you are on a tight fixed retirement income. They may be ideal places to retire abroad in other respects, but your purchasing power on a ‘fixed’ income will erode rapidly.

• Saudi Arabia:4.2
• Panama:4.2
• Grenada:4.2
• United Kingdom:4.3
• Chile:4.4
• Saint Kitts and Nevis:4.4
• Armenia:4.4
• Cape Verde:4.4
• Lao People’s Democratic Republic:4.5
• El Salvador:4.6
• Guinea-Bissau:4.6
• Romania:4.8
• China:4.8
• Fiji:4.8
• Ireland:4.9
• Gabon:5.0 (price of a basket of goods doubles every 14 years)
• Iceland:5.1
• Bhutan:5.2
• Seychelles:5.3
• Swaziland:5.3
• Colombia:5.4
• Jordan:5.4
• Nigeria:5.4
• Kuwait:5.5
• Samoa:5.6
• Lithuania:5.7
• Tonga:5.9
• Cambodia:5.9
• Senegal:5.9
• Oman:6.0 (price of a basket of goods doubles every 12 years)

Very High Consumer Price Index: Countries With a Very High Inflation Rate (CPI 6.1-8.0)

Countries in this category are developing countries high inflation rates. Retiring abroad to countries in this category will be challenging if your retirement income is fixed and your retirement budget is on the lean side.

• Dominican Republic:6.1
• Nepal:6.1
• Uganda:6.1
• Serbia:6.4
• Indonesia:6.4
• India:6.4
• Guatemala:6.5
• Estonia:6.6
• Suriname:6.7
• Namibia:6.7
• Honduras:6.9
• Saint Vincent and the Grenadines:7.0 (price of a basket of goods doubles every 10 years)
• Tanzania (United Republic of):7.0
• Botswana:7.1
• South Africa:7.1
• Mauritania:7.3
• Maldives:7.4
• Pakistan:7.6
• Solomon Islands:7.7
• Hungary:7.9
• Trinidad and Tobago:7.9
• Sudan:8.0 (price of a basket of goods doubles every 9 years)
• Lesotho:8.0
• Malawi:8.0

Extremely High Consumer Price Index: Countries With an Extremely High Inflation Rate (CPI greater than 8.0)

Countries in this category have very high inflation rates, with the price of a basket of goods doubling anywhere from 2 – 9 years. If the inflation rates do not change, these countries would not be recommended for anyone on a fixed retirement income that is very tight.

• Uruguay:8.1
• Paraguay:8.1
• Mozambique:8.2
• Burundi:8.3
• Bulgaria:8.4
• Belarus:8.4
• Haiti:8.5
• Bolivia:8.7
• Argentina:8.8
• Turkey:8.8
• Mauritius:8.8
• Viet Nam:8.9
• Russian Federation:9.0 (price of a basket of goods doubles every 8 years)
• Mongolia:9.0
• Bangladesh:9.1
• Rwanda:9.1
• Georgia:9.2
• Jamaica:9.3
• Egypt:9.3
• Costa Rica:9.4
• Kenya:9.8
• Yemen:10.0 (price of a basket of goods doubles every 7 years)
• Latvia:10.1
• Kyrgyzstan:10.2
• Madagascar:10.3
• Timor-Leste:10.3
• Ghana:10.7
• Zambia:10.7
• Kazakhstan:10.8
• Nicaragua:11.1
• Sierra Leone:11.7
• Angola:12.2 (price of a basket of goods doubles every 6 years)
• Guyana:12.3
• Moldova:12.4
• Ukraine:12.8
• Tajikistan:13.1
• Qatar:13.8
• Sri Lanka:15.8
• Azerbaijan:16.7
• Congo (Democratic Republic of the):16.9
• Afghanistan:17.0 (price of a basket of goods doubles every 4 years)
• Iran (Islamic Republic of):17.2
• Ethiopia:17.2
• Venezuela:18.7
• Myanmar:35.0 (price of a basket of goods doubles every 2 years)

Consumer Price Index: Summary of Country Comparisons

For retirees on small and fixed pensions, countries with a low inflation rate or consumer price index are more ideal long term retirement destinations. Of course, one needs to consider many other factors, but the inflation rate is a very useful statistic to evaluate to keep track of the purchasing power of your pension over time.

If the inflation rate is very high, expatriates living abroad will find that the purchasing power of their retirement incomes decreasing very rapidly from one year to the next. In general, from a financial perspective, countries with a high consumer price index may not be the best places to retire if your retirement income is fixed.

(Photo by: Srbichara)