Expert raises alarm bell as global inflation only expected to drop to 4.9 percent next year

An expert is concerned after new projections by the International Monetary Fund (IMF) showed global inflation was expected to remain high into next year.

The projections made for grim reading, with the Russia-Ukraine war and uncertainty caused by COVID-19 being blamed for the dire outlook.

While global inflation was expected to soften from 8.7 percent last year to 4.9 percent in 2024, Milford Asset Management portfolio manager Mark Riggall said that was still too elevated.

"That's a downward trend but 4.9 percent global inflation's still pretty high," he told AM co-host Amanda Gillies. "That's why the IMF is so concerned because you've got an economy that is on a slowing path, the growth rate is really quite low, you've still got inflation too high and yet you've got all these risks building in the financial system."

Riggall said central banks around the globe were trying to bring inflation under control but it was proving a tough ask.

"Policymakers have got a really tough time at the moment trying to balance their risk versus getting inflation down," he said on Thursday.

"What we've seen is this policy response from central banks, particularly, have been raising interest rates and putting the brakes on the global economy, and that's now coming through… what the central banks are trying to do is deliver a slowdown in growth and with that comes hand in hand a rise in unemployment.

Mark Riggall.
Mark Riggall. Photo credit: AM/Getty Images

"For New Zealand, [the IMF] think unemployment's going to go up to 5.3 percent which is almost 2 percentage points higher than where we're at currently - so they are forecasting some tough times ahead."

Overall, Riggall said the global economic situation would create more pressure in New Zealand.

"[The IMF] are modestly bringing down their forecasts versus what they thought six months ago so, for this year, expected [global] growth to be 2.8 percent and recovering to 3 percent next year," he said, noting earlier projections for global growth in 2024 were 3.4 percent.

"Growth is expected to be quite modest here in New Zealand - 0.8 percent growth this year - so it is quite a challenging outlook."

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