IMF estimates inflation to gradually decline to target, though emerging market economies to remain in ‘double-digit territory’

By Emir Yildirim

ISTANBUL (AA) – The IMF forecasts that global headline inflation is expected to fall from an average of 6.7% in 2023 to 5.8% this year, according to its World Economic Outlook report released on Tuesday.

The global headline inflation estimate for 2025 is at 4.3%, signaling continuing gradual declines to the target.

The decline in global headline inflation in 2024-25 is due to a broad-based decrease in core inflation, while the main driver in 2023 was due to lower fuel prices. Core inflation is estimated to drop due to the delayed effects of tight monetary policies of central banks worldwide and lower energy prices.

While disinflation estimates vastly differ region to region, advanced economies are projected to see a faster rate of decline in inflation, approximately by 2 percentage points from 2023 to 2024, and a stabilization at 2% in 2025, compared to emerging market and developing economies.

In emerging market and developing economies, inflation is estimated to decline from 8.1% last year to 7.9% this year and fall to 5.9% next year.

A gradual decrease in inflation is expected to decline towards inflation targets of most economies by the end of 2025, according to the report.

For instance, Asia’s inflation will be similar to advanced economies’, at 2.1% this year and 2.7% next year, partly due to “early monetary tightening and price controls in many countries in the region.”

Inflation estimates for emerging and developing Europe, Middle East, North Africa, and sub-Saharan Africa will remain in “double-digit territory,” the report said.

The annual average inflation for emerging and developing Europe, which was 17.1% last year, is estimated to be at 16.9% and fall to 11.1% in 2025, while the Middle East and Central Asia forecasts show inflation set to fall from 15.6% this year to 14.6% next year, with a prediction to land at 10.7% in 2025.

As for sub-Saharan Africa, the annual average inflation is estimated to rise to 18.1% this year from 17.6% last year, but to fall to 12.3% next year.

The “pass-through of past currency depreciation and administrative price adjustments” in Egypt and the “underperformance in agriculture” in Ethiopia are cited as the significant outliers accounting for double-digit inflation in the region.

In Latin America and the Caribbean, although inflation has fallen significantly from its peaks and continues to decline, the inflation estimates for large countries in the region were upwardly revised since July’s IMF report due to robust wage growth in Brazil and Mexico preventing faster disinflation in the services sector, weather events in Colombia, and hikes in regulated electricity tariffs in Chile.

As for Türkiye, inflation expectations for the country’s economy were at 43% for the end of 2024 and 24% for the next year’s end, while the unemployment estimate was at 9.3% for 2024 and 9.9% for 2025.