Economic Experts Survey: Inflation Remains High Worldwide (Q1 2023)
How are economists’ expectations for future price developments evolving worldwide? Are the central banks’ sizeable interest rate hikes having an impact, and can we observe a decline in inflation expectations? The latest wave of the Economic Expert Survey (EES) conducted by the ifo Institute and the Swiss Economic Policy Institute examines economists’ inflation expectations at the global level. The result: high inflation rates are still expected worldwide. It is true that the expected inflation rate for 2023 has slowly declined over the past three quarters. However, there have been no noticeable changes compared with the last wave of the EES survey (Q4 2022).
Global Inflation Expectations Stagnate at High Level
For 2023, the global average expected inflation rate is 7 percent. This is the median of the average expected inflation rates at country level. The median is used because expected inflation rates vary widely by region and are dramatically higher in individual countries and regions such as Africa than in the rest of the world.
The average rate of 7 percent expected in the current quarter is thus almost identical to the expected rate of 7.1 percent in the fourth quarter of 2022. Short-term inflation expectations are thus stagnating at a high level worldwide. Experts also expect high inflation rates worldwide in the coming years. However, with an average expected inflation rate of 5.9 percent for 2024, a slight decline is expected on average compared with 2023.
In the long term to 2026, too, inflation expectations remain high at 5 percent. The experts’ long-term inflation expectations are actually rising compared with the results of the previous quarter. Short- and long-term inflation expectations peaked in the third quarter of 2022 and have been at a slightly lower level since then.
Falling Inflation Expectations in the Long Term, but No Further Decline Compared with the Previous Quarter
There is considerable heterogeneity in inflation expectations worldwide. In the Americas, experts expect high and rising inflation rates overall, but there are major differences: While inflation expectations in North America are tending to fall, in Central America and especially in South America, inflation expectations have risen, in some cases sharply, compared with the survey in the last quarter. A similar picture can be observed for most regions in Africa, although here, too, the trends differ between the regions. Overall, however, inflation expectations for the respective regions have risen sharply compared with the previous quarter. There are also major differences in the regions of the Asian continent: While near-term inflation expectations in many parts of Asia have retreated compared with previous quarters, inflation expectations for 2023 have recently risen sharply, particularly in West Asia. In Oceania, inflation rates are expected to fall in the medium term, and experts’ assessments here are at a consistently low level by comparison.
In Europe, expectations are at the lowest level worldwide, both for the current year 2023 and for 2024 and 2026. Although there is a falling trend in expected inflation, the experts do not expect a return to the ECB’s inflation target of below but close to 2 percent by 2026. There are also major differences in the experts’ inflation expectations within the regions of Europe. For example, the expected inflation rates for 2023 are significantly higher in Eastern Europe than in other parts of the continent.
The Economic Experts Survey (EES) is a quarterly survey conducted by the ifo Institute and the Swiss Economic Policy Institute. 1,572 economic experts from 136 countries participated in the survey on inflation from March 9, 2023 to March 23, 2023.