Economic Experts Survey: High Inflation Expectations Worldwide for the Next Few Years (2 Quarter 2022)
What are economists’ expectations regarding future price developments? Paul Krugman and Lawrence H. Summers, two of the most influential economists alive, discussed on February 12, 2021, whether Joe Biden’s expansionary fiscal policy would lead to high inflation rates. While Krugman assumed that inflation would be transitory, Summers feared persistent high inflation rates. About a year later, on January 21, 2022, the two economists met again, but this time under different circumstances. At the beginning of 2022, there was a broad consensus that high inflation rates would not be a temporary phenomenon. Since then, the global energy and commodity markets have tightened even more. This round of the Economic Expert Survey (EES), conducted by the ifo Institute and the Swiss Economic Policy Institute, examines the inflation expectations of economists worldwide. The result: high price increases are expected worldwide in the coming years.
Global Inflation Expectations Well Above Inflation in the Last Decade
For 2022, the expected inflation rate is 7.7 percent on average worldwide. This means that the inflation rate for 2022 would be 5 percentage points higher than the average inflation rate over the past decade (2010 to 2019) as stated by the World Bank. The experts also expect higher inflation rates worldwide in the coming years. For 2023, an average inflation rate of 6.2 percent is expected, only a slight decrease compared to 2022. For 2026, the participants still expect a strongly increased inflation rate of 4.5 percent. Experts worldwide hence assume that inflation is here to stay.
Significant Regional Differences in Inflation Expectations
Although inflation expectations for 2022 are high globally, they differ greatly at the country and regional level. At well over 20 percent in some cases, experts expect the highest inflation rates worldwide in South America, North and East Africa, and West and Central Asia. The lowest inflation expectations are to be found in North and Central America, large parts of Europe, East and Southeast Asia, Oceania, and southern Africa, with values below 10 percent. This finding shows that the historically high inflation rates in Germany, which are the subject of much political and public debate, are still relatively low compared to other parts of the world.
Some cases of strong regional heterogeneities within a continent are striking. For Eastern Europe, respondents expect a much higher inflation rate compared to Western, Northern, and Southern Europe. Differences are also apparent in Africa: high inflation rates are expected for North and East Africa, while expectations for West, Central, and Southern Africa are significantly lower. Other regions, however, show more homogeneous inflation expectations (e.g., Central and North America).
Inflation Rates Expected to Decrease but Just Slowly
While Eastern Europe has significantly higher inflation expectations for 2022 (15.8 percent) than the other European regions, experts there also expect the sharpest decline. Nevertheless, the inflation rate expected for 2026 in Eastern Europe is the highest compared to the other European regions. The lowest expected inflation rate for 2026 is in Western Europe at 2.4 percent. This is also the lowest value worldwide.
For North America, the inflation rate is expected to fall by 3.8 percentage points to a level of 2.6 percent in the period from 2022 to 2026. In Central America, the decline is somewhat weaker, with inflation expectations there still adding up to 4.3 percent for 2026. In South America, inflation expectations for 2022 are at a very high level. Here, experts expect the sharpest decline by 2026: the expected inflation for 2026 is 7.6 percent, 13.6 percentage points lower than in 2022.
Inflation expectations in Asia vary widely in both, level and development. In Central and South Asia, very high inflation rates of around 20 percent are expected for 2022. Both regions are expected to see just a slight decrease in inflation in the coming years. Experts in West Asia forecast similarly high inflation for 2022, but expect a much lower inflation rate for 2026. The situation is different in East and Southeast Asia: inflation expectations there are at a much lower level of just over 5 percent for 2022, with East Asia being the only region in the world to expect a slight increase in the inflation rate in the coming years.
In Africa, inflation expectations differ between North and East Africa on the one hand and West, Central, and Southern Africa on the other hand. North and East Africa have exceptionally high expected inflation rates of up to 80 percent for 2022. However, respondents there expect a strong decline by 2026. Interestingly, East Africa is expected to have an even higher inflation rate in 2023 than in 2022. In West, Central, and Southern Africa, expected inflation is at a relatively low level. For these regions, inflation rates are expected to decline slightly in the coming years.
In Oceania, inflation is expected to fall only slightly, from 6.3 percent in 2022 to 5.0 percent in 2026.
The Economic Experts Survey (EES) is a quarterly survey conducted by the ifo Institute and the Swiss Economic Policy Institute; 663 economic experts from 113 countries participated in the survey on inflation from May 25, 2022 to June 18, 2022.
