Global inflation is forecast to average 4.3% in 2025, marking a significant step toward price stability after years of economic turbulence. Advanced economies are expected to stabilize inflation at approximately 2%, while emerging and developing economies will see inflation decline to 5.9%, although regional disparities will persist.
These projections are based on the International Monetary Fund’s (IMF) World Economic Outlook report published in October 2024.
According to the report, advanced economies are projected to achieve near-target levels of 2%, supported by the delayed effects of earlier monetary tightening, subdued energy prices, and stable supply chains.
Emerging and developing economies are expected to experience a sharper decline in inflation, dropping from 7.9% in 2024 to 5.9% in 2025.
However, this group will face uneven progress, as regions like sub-Saharan Africa, the Middle East, and North Africa continue to grapple with double-digit inflation due to structural challenges such as currency depreciation, administrative price adjustments, and agricultural inefficiencies.
Emerging Asia is forecast to record some of the lowest inflation rates among developing regions, with 2025 projections at 2.7%, thanks to proactive monetary policies and price controls.
In contrast, Latin America and the Caribbean will continue on a downward inflationary trend, but wage growth in countries like Brazil and Mexico, weather-related disruptions in Colombia, and energy price adjustments in Chile could slow the pace of improvement.
The report notes that regions with persistent high inflation, such as sub-Saharan Africa, will continue to face challenges, with agricultural underperformance and the pass-through effects of earlier currency depreciation remaining significant hurdles. Countries like Egypt and Ethiopia are expected to stay above the global average due to specific domestic challenges.
The IMF report highlights that the projected decline in global inflation is underpinned by several factors, including the lagged impact of aggressive monetary policies implemented in previous years.
Core inflation is expected to fall significantly, following a modest 0.1 percentage point decline in 2023 and a more substantial 1.3 percentage point drop in 2024.
The easing of energy prices and stabilization of supply chains are additional contributors to disinflation, particularly in advanced economies, which are poised to benefit from synchronized monetary policy tightening and improved macroeconomic stability.
Despite the positive outlook, the report warns that returning inflation to target levels will remain a challenge for many economies. By 2025, more than three-quarters of inflation-targeting advanced and emerging market economies are expected to miss their annual targets or midpoint ranges due to carryover effects from 2024.
However, sequential declines in inflation are projected to bring most economies within range of their targets by the end of the year.
Emerging and developing economies will need to address structural weaknesses, including fiscal imbalances and inefficiencies in key sectors, to sustain progress, while advanced economies will need to mitigate wage pressures and monitor service sector inflation to maintain stability.
