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Mapped: 2023 Inflation Forecasts by Country

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2023 Inflation

Mapped: 2023 Inflation Forecasts by Country

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Inflation surged on a global scale in 2022, hitting record-level highs in many countries. Could it finally subside in 2023?

In the above infographic, we look to answer that question using the World Economic Outlook report by the International Monetary Fund (IMF).

Not Yet Out of the Woods

While the IMF predicts that global inflation peaked in late 2022, rates in 2023 are expected to remain higher than usual in many parts of the world. Following the 8.8% global inflation rate in 2022, the IMF forecasts a 6.6% rate for 2023 and 4.3% rate for 2024 based on their most recent January 2023 update.

For the optimists, the good news is that the double-digit inflation that characterized nearly half the world in 2022 is expected to be less prevalent this year. For the pessimists, on the other hand, looking at countries like Zimbabwe, Venezuela, Turkey, and Poland may suggest that we are far from out of the woods on a global scale.

Here are the countries with the highest forecasted inflation rates in 2023.

Country / RegionProjected Annual Inflation % Change 2023
🇿🇼 Zimbabwe204.6%
🇻🇪 Venezuela195.0%
🇸🇩 Sudan76.9%
🇦🇷 Argentina76.1%
🇹🇷 Turkiye51.2%
🇮🇷 Islamic Republic of Iran40.0%
🇱🇰 Sri Lanka29.5%
🇪🇹 Ethiopia28.6%
🇸🇷 Suriname27.2%
🇸🇱 Sierra Leone26.8%
🇸🇸 South Sudan21.7%
🇭🇹 Haiti21.2%
🇬🇭 Ghana20.9%
🇵🇰 Pakistan19.9%
🇳🇬 Nigeria17.3%
🇾🇪 Yemen17.1%
🇲🇼 Malawi16.5%
🇵🇱 Poland14.3%
🇲🇩 Moldova13.8%
🇲🇲 Myanmar13.3%
🇭🇺 Hungary13.3%
🇧🇾 Belarus13.1%
🇰🇬 Kyrgyz Republic12.4%
🇬🇳 Guinea12.2%
🇲🇳 Mongolia12.2%
🇪🇬 Egypt12.0%
🇦🇴 Angola11.8%
🇰🇿 Kazakhstan11.3%
🇸🇹 São Tomé and Príncipe11.2%
🇷🇴 Romania11.0%
🇺🇿 Uzbekistan10.8%
🇦🇿 Azerbaijan10.8%
🇹🇲 Turkmenistan10.5%
🇸🇰 Slovak Republic10.1%
🇨🇩 Democratic Republic of the Congo9.8%
🇿🇲 Zambia9.6%
🇪🇪 Estonia9.5%
🇲🇪 Montenegro9.2%
🇧🇩 Bangladesh9.1%
🇬🇧 United Kingdom9.0%

While the above countries fight to sustain their purchasing power, some parts of the world are expected to continue faring exceptionally well against the backdrop of a widespread cost-of-living crisis. Many Asian countries, notably Japan, Taiwan, and China, are all predicted to see inflation lower than 3% in the upcoming year.

When it comes to low inflation, Japan in particular stands out. With strict price controls, negative interest rates, and an aging population, the country is expected to see an inflation rate of just 1.4% in 2023.

Inflation Drivers

While rising food and energy prices accounted for much of the inflation we saw in 2022, the IMF’s World Economic Outlook highlights that core inflation, which excludes food, energy, transport and housing prices, is now also a major driving factor in high inflation rates around the world.

Drivers of Inflation
What makes up core inflation exactly? In this case, it would include things like supply chain cost pressures and the effects of high energy prices slowly trickling down into numerous industries and trends in the labor market, such as the availability of jobs and rising wages. As these macroeconomic factors play out throughout 2023, each can have an effect on inflation.

The Russia-Ukraine conflict and the lingering effects of the COVID-19 pandemic are also still at play in this year’s inflation forecasts. While the latter mainly played out in China in 2022, the possible resurgence of new variants continues to threaten economic recovery worldwide, and the war persists in leaving a mark internationally.

The confluence of macroeconomic factors currently at play is unlike what we’ve seen in a long time. Though the expertise of forecasters can give us a general understanding, how they will actually play out is for us to wait and see.

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Markets

How Disinflation Could Affect Company Financing

History signals that after a period of slowing inflation—also known as disinflation—debt and equity issuance expands.

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Chart showing U.S. Equity Issuance Deal Value from 1980-2000. Equity Issuance goes up over time, with the 300% increase in 1983 highlighted at the end of the disinflation period.
The following content is sponsored by Citizens Commercial Banking

How Disinflation Could Affect Company Financing

The macroeconomic environment is shifting. Since the second half of 2022, the pace of U.S. inflation has been dropping.

We explore how this disinflation may affect company financing in Part 2 of our Understanding Market Trends series from Citizens.

Disinflation vs. Deflation

The last time inflation climbed above 9% and then dropped was in the early 1980’s.

Time PeriodMarch 1980-July 1983June 2022-April 2023*
Inflation at Start of Cycle14.8%9.1%
Inflation at End of Cycle2.5%4.9%

* The June 2022-April 2023 cycle is ongoing. Source: Federal Reserve. Inflation is based on the Consumer Price Index.

A decrease in the rate of inflation is known as disinflation. It differs from deflation, which is a negative inflation rate like the U.S. experienced at the end of the Global Financial Crisis in 2009.

How might slowing inflation affect the amount of debt and equity available to companies?

Looking to History

There are many factors that influence capital markets, such as technological advances, monetary policy, and regulatory changes.

With this caveat in mind, history signals that both debt and equity issuance expand after a period of disinflation.

Equity Issuance

Companies issued low levels of stock during the ‘80s disinflation period, but issuance later rose nearly 300% in 1983.

YearDeal Value
1980$2.6B
1981$5.0B
1982$3.6B
1983$13.5B
1984$2.5B
1985$12.0B
1986$24.2B
1987$24.9B
1988$16.9B
1989$12.9B
1990$13.4B
1991$45.2B
1992$50.3B
1993$95.3B
1994$63.7B
1995$79.7B
1996$108.7B
1997$106.5B
1998$97.0B
1999$142.8B
2000$156.5B

Source: Bloomberg. U.S. public equity issuance dollar volume that includes both initial and follow-on offerings and excludes convertibles.

Issuance grew quickly in the years that followed. Other factors also influenced issuance, such as the macroeconomic expansion, productivity growth, and the dotcom boom of the ‘90s.

Debt Issuance

Similarly, companies issued low debt during the ‘80s disinflation, but levels began to increase substantially in later years.

YearDeal Value Interest Rate
1980$4.5B11.4%
1981$6.7B13.9%
1982$14.5B13.0%
1983$8.1B11.1%
1984$25.7B12.5%
1985$46.4B10.6%
1986$47.1B7.7%
1987$26.4B8.4%
1988$24.7B8.9%
1989$29.9B8.5%
1990$40.2B8.6%
1991$41.6B7.9%
1992$50.0B7.0%
1993$487.8B5.9%
1994$526.4B7.1%
1995$632.7B6.6%
1996$906.0B6.4%
1997$1.3T6.4%
1998$1.8T5.3%
1999$1.8T5.7%
2000$2.8T6.0%

Source: Dealogic, Federal Reserve. Data reflects U.S. debt issuance dollar volume across several deal types including: Asset Backed Securities, U.S. Agency, Non-U.S. Agency, High Yield, Investment Grade, Government Backed, Mortgage Backed, Medium Term Notes, Covered Bonds, Preferreds, and Supranational. Interest Rate is the 10 Year Treasury Yield.

As interest rates dropped and debt capital markets matured, issuing debt became cheaper and corporations seized this opportunity.

It’s worth noting that debt issuance was also impacted by other factors, like the maturity of the high-yield debt market and growth in non-bank lenders such as hedge funds and pension funds.

Then vs. Now

Could the U.S. see levels of capital financing similar to what happened during the ‘80s disinflation? There are many economic differences between then and now.

Consider how various indicators differed 10 months into each disinflationary period.

January 1981April 2023*
Inflation Rate
Annual
11.8%4.9%
Inflation Expectations
Next 12 Months
9.5%4.5%
Interest Rate
10-Yr Treasury Yield
12.6%3.7%
Unemployment Rate
Seasonally Adjusted
7.5%3.4%
Nominal Wage Growth
Annual, Seasonally Adjusted
9.3%5.0%
After-Tax Corporate Profits
As Share of Gross Value Added
9.1%13.8%

* Data for inflation expectations and interest rate is as of May 2023, data for corporate profits is as of Q4 1980 and Q1 2023. Inflation is a year-over-year inflation rate based on the Consumer Price Index. Source: Federal Reserve.

The U.S. economy is in a better position when it comes to factors like inflation, unemployment, and corporate profits. On the other hand, fears of an upcoming recession and turmoil in the banking sector have led to volatility.

What to Consider During Disinflation

Amid uncertainty in financial markets, lenders and investors may be more cautious. Companies will need to be strategic about how they approach capital financing.

  • High-quality, profitable companies could be well positioned for IPOs as investors are placing more focus on cash flow.
  • High-growth companies could face fewer options as lenders become more selective and could consider alternative forms of equity and private debt.
  • Companies with lower credit ratings could find debt more expensive as lenders charge higher rates to account for market volatility.

In uncertain times, it’s critical for businesses to work with the right advisor to find—and take advantage of—financing opportunities.

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