Global Inflation Tracker: Q1 2023

February 2023

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.

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This report comes in PPT.

Key Findings

Inflation forecast to moderate in 2023

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.

Emerging markets remain under pressure

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.

Weaker purchasing power and lower savings to hinder consumption

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.

Key findings
Inflation forecast to decline in 2023 but remain above central banks’ targets
Forecast inflation rate in 2023 across countries
Food and services to drive consumer inflation in emerging markets
US dollar appreciation stalls but emerging countries remain under pressure
Commodity and manufactured goods prices remain stable
China’s recovery can contribute to higher commodity prices in the second half of 2023
Prices of services continue to increase as labour market problems persist
Ongoing globalisation reset could increase inflationary pressures on supply side
Key risks for inflation in 2023
Inflation forecasts: Q1 2023
Rising prices erode consumer income gains
Tighter monetary policies to impact consumers in 2023
Cost-of-living crisis impacts consumer willingness to spend
Rising prices put the highest pressure on low-income consumers
Median online price changes indicate slower price growth of essential products
US: Labour shortages fuel risk of persistent service sector inflation
China: Inflation set to intensify on reviving domestic demand, but will remain soft
France: Energy price pressures remain principal driver of inflation
Germany: Elevated energy prices create second-round effects that keep inflation high
Italy: Inflation remains high due to cascading effect of elevated energy prices
Spain: Broad-based price pressures allow only gradual decline of inflation in 2023
UK: Inflation to ease on the back of faltering domestic demand, but will remain elevated
Japan: Inflation to slow due to gradually easing import cost-push pressures
Brazil: Inflation to ease further helped by tight monetary policy and weak economic growth
India: Inflation growth slowing thanks to moderating food prices
Inflationary pressures moderate but remain elevated
Key country insights


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