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The surge in inflation and uncertainty around how long it will persist has put pressure on companies in Asia to adapt their business strategies. While we expect inflation to revert to historical trends in the second half of 2022 based on energy prices stabilizing, supply chain bottlenecks showing some signs of easing, and consumer spending shifting from goods to services, this inflationary cycle has been longer and broader than in recent history. The risk of high inflation being sustained for longer needs to be watched closely.
Wages vs Inflation
Employers must balance the cost of their compensation programs with market competitiveness and tight labor supply. While salary budgets for many jobs are higher than in recent years, wages (based on the cost of labor) tend not to rise or fall at the same rate as inflation (based on changes in prices). As a result, managing employee expectations and looking for opportunities to support employees and enhance the employee experience will be critically important to retain and engage employees