Global inflation set to drop this year amid subpar economic growth

The ongoing war in Ukraine and logistical challenges posed by the pandemic and other geopolitical issues have kept price pressures high, particularly in energy commodities and general foodstuff.
Global inflation is geographically broad-based, while it still remains high in the Americas and Europe, it is lower in many parts of Asia.
But inflation has started to show signs of easing everywhere from the multi-decade highs reached in many countries following reports of slowing global growth this year.
With global growth projected to fall from an estimated 3.4% in 2022 to 2.9% in 2023, global inflation will also drop in 2023 and 2024 amid subpar economic growth.
Some 84% of countries are expected to have lower headline (consumer price index) inflation in 2023 than in 2022, according to the International Monetary Fund (IMF).
Global inflation is set to fall from 8.8% in 2022 (annual average) to 6.6% in 2023 and 4.3% in 2024 –– above pre-pandemic (2017-19) levels of about 3.5%. The projected disinflation partly reflects declining international fuel and non-fuel commodity prices due to weaker global demand. It also reflects the cooling effects of monetary policy tightening on underlying (core) inflation, which globally is expected to decline from 6.9% in the fourth quarter of 2022 (year over year) to 4.5% by the fourth quarter of 2023.
Still, disinflation will take time: by 2024, projected annual average headline and core inflation will, respectively, still be above pre-pandemic levels in 82% and 86% of economies. In advanced economies, annual average inflation is projected to decline from 7.3% in 2022 to 4.6% in 2023 and 2.6% in 2024 –– above target in several cases.
In emerging market and developing economies, projected annual inflation declines from 9.9% in 2022 to 8.1% in 2023 and 5.5% in 2024, above the 4.9% pre-pandemic (2017–19) average.
In low-income developing countries, inflation is projected to moderate from 14.2% in 2022 to 8.6% in 2024 –– still high, but close to the pre-pandemic average.
In most economies, amid the cost-of-living crisis, the priority remains achieving sustained disinflation. With tighter monetary conditions and lower growth potentially affecting financial and debt stability, it is necessary to deploy macro-prudential tools and strengthen debt restructuring frameworks.
Accelerating Covid-19 vaccinations in China would safeguard the recovery, with positive cross-border spillovers, IMF noted.
Fiscal support should be better targeted at those most affected by elevated food and energy prices, and broad-based fiscal relief measures should be withdrawn.
Stronger multilateral co-operation is essential to preserve the gains from the rules-based multilateral system and to mitigate climate change by limiting emissions and raising green investment.
The rise in energy prices was the main driver of inflation in many countries, even before Russia invaded Ukraine.
Higher inflation has also spread beyond energy to many other items, with rising food prices hitting the poorest consumers in particular.
Rising prices limit what households can spend on goods and services. For the less well-off, this could lead to people struggling to afford basics such as food and shelter.