This report examines inflation levels and drivers globally and in key countries. Global inflation is moderating, although volatility in the energy markets and faster consumption growth in China are among the key risks that could increase inflation. Rising prices are also undermining consumer purchasing power, while persistent inflationary pressures are encouraging central banks to tighten monetary policy.
This report comes in PPT.
Under the baseline scenario, global inflation is forecast to reach 6.8% in 2023, and then fall to 4.4% in 2024. Slower economic growth, stable commodity prices, supply chain improvements and moderating housing prices contribute to the slowing inflation. 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 tighter monetary policies in 2023. Faster economic growth in China and volatility in the global energy markets remain among the key risks that could accelerate inflation in the second half of 2023.
Prices of services are forecast to maintain growth in 2023-2024 and contribute to the global inflationary pressures. Relaxation of pent-up demand after the COVID-19 pandemic, tight labour markets and sustained wage growth are contributing to the higher prices of services and adding to non-core inflation, which excludes food and energy price fluctuations. Education, healthcare services, retail and entertainment services are some of the most labour-intensive sectors, and will feel the highest pressure from rising wages.
Real disposable consumer income is forecast to stagnate, growing by just 0.4% in 2023. Still high inflation rates will significantly erode consumer income gains, resulting in stagnating real disposable incomes. Weak consumer purchasing power, combined with higher interest rates, is forecast to have a negative effect on consumption in 2023, primarily affecting consumption of non-essential services and purchases of big-ticket items.
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