BusinessWhy Economists Think Inflation Will Start Declining In 2023 And Why It's...

    Why Economists Think Inflation Will Start Declining In 2023 And Why It’s Not Such Good News

    Probably the worst in terms of inflation is over.

    At least that is what the consensus of economists and the main economic organizations such as the IMF or the World Bank thinks after most of the world’s countries experienced in this year that we left behind price rises not seen in four decades.

    There is no doubt that inflation will continue to hurt the pockets of millions of citizens in 2023, but it will give a general respite with a slow trickle down over the next 12 months.

    At the end of that period, the International Monetary Fund expects world inflation to have fallen to 4.7%just under half of its current level.

    Of course, experts warn, what is happening in each of the world’s major economies is different.

    What is happening in Europe is not the same as in the United States or the rest of the advanced economies or in the emerging countries.

    But many seem to agree that global GDP growth will continue to slow and inflation has peaked.

    However, it will remain at high levels, in a context that many they have renamed the “nonew nonormality”.

    “Everything indicates that inflation in 2023 will moderate, although will continue to be higher than before the pandemic“Juan Carlos Martinez Lazaro, professor of Economics at IE University, explains to BBC Mundo.

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    We will not see an abrupt fall. The price of oil has fallen, but it remains high. The same as raw materials and there are still certain problems in global supply chains”, recalls Martinez Lazaro.

    “Therefore we expect that in 2023 the average inflation rates will be lower than those seen in 2022. But of course it will take time and it will not be in 2023 when it will be possible to return to pre-pandemic inflation levels. To reach that stage, months are still needed.

    In fact, US Federal Reserve officials believe that inflation will take until 2025 to return to the objective of the institution, which is around 2%.

    “Many of the market pressures that occurred in 2022, such as the skyrocketing energy prices, widespread cost-of-living crisis, tax and interest rate hikes they have not yet exerted their full impact”, says Alvaro Anton, head of Iberia for the investment firm Abrdn.

    That is why he believes that although there will be regional and national variations, it is likely that “headline inflation in most developed markets will reach its peak in late 2022 or early 2023“, Add.

    The other point on which economists agree is that the slowdown in inflation will be linked to the growth slowdown, which will cause pain to homes on another side.

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    In the end, if families have to pay more for everything, what happens is that they can buy less, they can spend less on other things like trips or new cars.

    Especially if what we are talking about is pay more for basic items like food and energywhich is where the strongest price rises are concentrated.

    If we add to this the fact that most central banks have tightened their monetary policy significantly and have raised interest rates, this translates into less consumption by families and less activity by companies.

    This last point is the one that can shoot unemployment and drag the prices down.

    “It is likely that technical recessions in multiple economies during 2023which will cause world growth to fall below its potential to 2.6%, from 3.3% in 2022”, they forecast in Scope Ratings.

    However, from the credit rating agency They rule out a serious recession in the world or that we will see a global financial crisis next year.

    In this environment, with the war in Ukraine and geopolitical tensions heightened, with covid spreading across China, the UK facing a winter of strikes and a cold snap in Europe, economic contraction will be very difficult to avoid.

    “My forecast for America is recession. You have to have one. Their current job market is tighter than ever in a post-war period and, surprisingly, it hasn’t weakened,” says Steven Bell, chief EMEA economist at Columbia Threadneedle in an interview.

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    His opinion is shared by other experts. To cool inflation in the United States, they say, it is necessary for the labor market to take a breather.

    “I think they need a recession. I don’t think it’s deep. It will be light and the response will be quick, but I think they need it. Y Europe is going to have one too due to the incredible increase in energy prices”, adds Bell.

    “And we must not forget that a recession in developed countries, generally leads to recession in emerging marketssays the economist.

    A designation that often includes several Latin American countries.

    The IMF also expects that the measures to contain the recession will depress many economies.

    In fact, the director of the International Monetary Fund, Kristalina Georgieva, told a news program on the US network CBS that they hope that up to “one third of the world economy” enters recession in this coming year.

    Kristalina Georgieva said that 2023 will be “tougher” than last year, since the cycle is slowing down in the United States, the European Union and China, three of the engines of international growth.

    Source: La Opinion

    This post is posted by Awutar staff members. Awutar is a global multimedia website. Our Email: [email protected]


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