Persistently high inflation will harm the world economy this year, according to a new poll of economists.
The poll, conducted by the Reuters News Agency, found that a majority of economists have trimmed their global growth outlook for 2022 on worries of slowing demand and the risk that interest rates will rise faster than previously expected.
This represents a sea change from just three months ago, when most economists were siding with central bankers in their then view that a surge in inflation, driven in part by pandemic-related supply bottlenecks, would be transitory.
In the latest quarterly survey of more than 500 economists taken throughout January, economists raised their 2022 inflation forecasts for most of the 46 economies covered.
At the same time, economists downgraded their global growth forecasts. After expanding 5.8% last year, the world economy is expected to slow to 4.3% growth in 2022, down from 4.5% predicted in October, in part because of higher interest rates and costs of living.
Global economic growth is seen slowing further to 3.6% and 3.2% in 2023 and 2024, respectively, according to the poll of economists.
Nearly 40% of those surveyed singled out inflation as the top risk to the global economy this year, with nearly 35% picking COVID-19 variants, and 22% worried about central banks moving too quickly on interest rates.
The U.S. Federal Reserve on Wednesday signaled it would raise its benchmark federal funds rate from a record low of 0-0.25% in March after shuttering its bond purchase program.
The Bank of England was the first major central bank to raise rates since the pandemic started and is expected to act again this year. The Bank of Canada is also seen hiking rates soon.
In contrast, most economists expect the European Central Bank and the Bank of Japan to stay put on interest rates at least until the end of next year (2023).
The growth outlook for over 60% of the 46 economies covered in the poll was either downgraded or left unchanged for 2022 and about 90% of respondents, 144 of 163, said there was a downside risk to their forecasts.
