This report examines inflation levels and drivers globally and in key countries. In 2023, global inflation is expected to ease from its peak in 2022, but remaining significantly above-trend. Geopolitical risks and uncertainty in the energy market are key upside risks, while China’s reopening could also add pressure on commodity prices. Growth in consumer real disposable income is expected to stagnate in 2023 as high inflation erodes income gains, undermining consumer spending power.
This report comes in PPT.
Under the baseline scenario, global inflation is forecast to reach 6.5% in 2023 and then fall to 4.5% in 2024. Slower economic growth and consequently falling B2B demand for manufactured goods, stabilisation of commodity and energy prices, and improvements in global supply chains are helping to cap inflation growth. However, inflation in the largest economies is forecast to remain above the targets set by the central banks. To combat inflation, central banks are expected to continue to tighten monetary policy over the medium term. Faster economic growth in China and increase in energy prices also could add to the higher inflationary pressures in the second half of 2023.
The emerging markets are forecast to face higher inflationary pressures over 2023-2024. Inflation in developing economies is forecast to reach 7.9% in 2023 and decline to 5.8% in 2024. Higher sensitivity to the commodity price fluctuations and depreciation of the national currencies against the US dollar largely add to the inflationary pressures. Moreover, faster growth of the services sector and delayed pass-through of higher commodity and energy prices in the emerging markets are expected to contribute to the higher price growth of essential goods and impact consumer purchasing power.
Real disposable consumer income is forecast to stagnate as high inflation erodes income gains and hurts the spending power of consumers. The global disposable income per capita is forecast to grow by 0.1% in real terms in 2023, and by 1.5% in 2024. Economic data from the largest economies also indicate declining consumer savings. High household savings accumulated during the pandemic helped to cushion inflationary effects and support consumption, although this effect is forecast to wane in 2023. Rising costs of essential goods and higher interest rates further limit consumer demand for big-ticket items and are likely to contribute to the lower inflationary pressures on the demand side.
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