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Mapped: 2023 Inflation Forecasts by Country

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Mapped: 2023 Inflation Forecasts by Country

Mapped: 2023 Inflation Forecasts by Country

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
๐Ÿ‡ฟ๐Ÿ‡ผ Zimbabwe204.6%
๐Ÿ‡ป๐Ÿ‡ช Venezuela195.0%
๐Ÿ‡ธ๐Ÿ‡ฉ Sudan76.9%
๐Ÿ‡ฆ๐Ÿ‡ท Argentina76.1%
๐Ÿ‡น๐Ÿ‡ท Turkiye51.2%
๐Ÿ‡ฎ๐Ÿ‡ท Islamic Republic of Iran40.0%
๐Ÿ‡ฑ๐Ÿ‡ฐ Sri Lanka29.5%
๐Ÿ‡ช๐Ÿ‡น Ethiopia28.6%
๐Ÿ‡ธ๐Ÿ‡ท Suriname27.2%
๐Ÿ‡ธ๐Ÿ‡ฑ Sierra Leone26.8%
๐Ÿ‡ธ๐Ÿ‡ธ South Sudan21.7%
๐Ÿ‡ญ๐Ÿ‡น Haiti21.2%
๐Ÿ‡ฌ๐Ÿ‡ญ Ghana20.9%
๐Ÿ‡ต๐Ÿ‡ฐ Pakistan19.9%
๐Ÿ‡ณ๐Ÿ‡ฌ Nigeria17.3%
๐Ÿ‡พ๐Ÿ‡ช Yemen17.1%
๐Ÿ‡ฒ๐Ÿ‡ผ Malawi16.5%
๐Ÿ‡ต๐Ÿ‡ฑ Poland14.3%
๐Ÿ‡ฒ๐Ÿ‡ฉ Moldova13.8%
๐Ÿ‡ฒ๐Ÿ‡ฒ Myanmar13.3%
๐Ÿ‡ญ๐Ÿ‡บ Hungary13.3%
๐Ÿ‡ง๐Ÿ‡พ Belarus13.1%
๐Ÿ‡ฐ๐Ÿ‡ฌ Kyrgyz Republic12.4%
๐Ÿ‡ฌ๐Ÿ‡ณ Guinea12.2%
๐Ÿ‡ฒ๐Ÿ‡ณ Mongolia12.2%
๐Ÿ‡ช๐Ÿ‡ฌ Egypt12.0%
๐Ÿ‡ฆ๐Ÿ‡ด Angola11.8%
๐Ÿ‡ฐ๐Ÿ‡ฟ Kazakhstan11.3%
๐Ÿ‡ธ๐Ÿ‡น Sรฃo Tomรฉ and Prรญncipe11.2%
๐Ÿ‡ท๐Ÿ‡ด Romania11.0%
๐Ÿ‡บ๐Ÿ‡ฟ Uzbekistan10.8%
๐Ÿ‡ฆ๐Ÿ‡ฟ Azerbaijan10.8%
๐Ÿ‡น๐Ÿ‡ฒ Turkmenistan10.5%
๐Ÿ‡ธ๐Ÿ‡ฐ Slovak Republic10.1%
๐Ÿ‡จ๐Ÿ‡ฉ Democratic Republic of the Congo9.8%
๐Ÿ‡ฟ๐Ÿ‡ฒ Zambia9.6%
๐Ÿ‡ช๐Ÿ‡ช Estonia9.5%
๐Ÿ‡ฒ๐Ÿ‡ช Montenegro9.2%
๐Ÿ‡ง๐Ÿ‡ฉ Bangladesh9.1%
๐Ÿ‡ฌ๐Ÿ‡ง 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 yearโ€™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 weโ€™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 in a Minute

What is the Success Rate of Actively Managed Funds?

For actively managed funds, the odds of beating the market over the long run are like finding a needle in a haystack.

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Actively Managed Funds

What is the Success Rate of Actively Managed Funds?

Over a 20-year period, 95% of large-cap actively managed funds have underperformed their benchmark.

The above graphic shows the performance of actively managed funds across a range of fund types, using data from S&P Global via Charlie Bilello.

Missing the Mark: Actively Managed Funds

Several factors present headwinds to actively managed funds.

  • Trading costs: First, fund managers will trade more often than passive funds. These in turn incur costs, impacting returns.
  • Cash holdings: Additionally, many of these funds hold a cash allocation of about 5% or more to capture market opportunities. Unlike active funds, their passive counterparts are often fully invested. Cash holdings can have the opposite effect than intendedโ€”dragging on overall returns.
  • Fees: Active funds can charge up to 1-2% in investment manager fees while funds that tracked an index passively charged just 0.12% on average in 2022. These additional costs add up over time.

Below, we show how active funds increasingly underperform against their benchmark over each time period.

Fund Type1 Year
% Underperformed
5 Year
% Underperformed
10 Year
% Underperformed
20 Year
% Underperformed
All Large-Cap 51879195
All Small-Cap 57718994
Large-Cap Growth 74869698
Large-Cap Value 59698587
Small-Cap Growth 80598597
Small-Cap Value 41819192
Real Estate 88627487

As we can see, 51% of all large-cap active mutual funds underperformed in a one-year period. That compares to 41% of small-cap value funds, which had the best chance of outperforming the benchmark annually. Also, an eye-opening 88% of real estate funds underperformed.

For context, Warren Buffettโ€™s firm Berkshire Hathaway has beat the S&P 500 two-thirds of the time. Even the worldโ€™s top stock pickers have a hard time beating the marketโ€™s returns.

2020 Market Crash: A Case Study

How about active fundsโ€™ performance during a crisis?

While the case for actively managed funds is often stronger during a market downturn, a 2020 study shows how they continued to underperform the index.

Overall, 74% of over 3,600 active funds with $4.9 trillion in assets did worse than the S&P 500 during the 2020 market plunge.

Stage of 2020 CycleTime Period% Underperforming S&P 500
CrisisFeb 20 - Apr 30, 202074.2
CrashFeb 20 - Mar 23, 202063.5
RecoveryMar 24 - Apr 30, 202055.8
Pre-CrisisOct 1 2019 - Jan 31, 202067.1

Source: NBER

In better news, roughly half underperformed through the recovery, the best out of any market condition that was studied.

The Bigger Impact

Of course, some actively managed funds outperform.

Still, choosing the top funds year after year can be challenging. Also note that active fund managers typically only run a portfolio for four and a half years on average before someone new takes over, making it difficult to stick with a star manager for very long.

As lower returns accumulate over time, the impact of investing in active mutual funds can be striking. If an investor had a $100,000 portfolio and paid 2% in costs every year for 25 years, they would lose about $170,000 to fees if it earned 6% annually.

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Ranked: The Largest Bond Markets in the World

The global bond market stands at $133 trillion in value. Here are the major players in bond markets worldwide.

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The Largest Bond Markets in the World

The Largest Bond Markets in the World

In 2022, the global bond market totaled $133 trillion.

As one of the worldโ€™s largest capital markets, debt securities have grown sevenfold over the last 40 years. Fueling this growth are government and corporate debt sales across major economies and emerging markets. Over the last three years, Chinaโ€™s bond market has grown 13% annually.

Based on estimates from the Bank for International Statements, this graphic shows the largest bond markets in the world.

โ„น๏ธ Total debt numbers here include both domestic and international debt securities in each particular country or region. BIS notes that international debt securities are issued outside the local market of the country where the borrower resides and cover eurobonds as well as foreign bonds, but exclude negotiable loans.

Ranked: The World’s Top Bond Markets

Valued at over $51 trillion, the U.S. has the largest bond market globally.

Government bonds made up the majority of its debt market, with over $26 trillion in securities outstanding. In 2022, the Federal government paid $534 billion in interest on this debt.

China is second, at 16% of the global total. Local commercial banks hold the greatest share of its outstanding bonds, while foreign ownership remains fairly low. Foreign interest in Chinaโ€™s bonds slowed in 2022 amid geopolitical tensions in Ukraine and lower yields.

Bond Market RankCountry / RegionTotal Debt OutstandingShare of Total Bond Market
1๐Ÿ‡บ๐Ÿ‡ธ U.S.$51.3T39%
2๐Ÿ‡จ๐Ÿ‡ณ China$20.9T16%
3๐Ÿ‡ฏ๐Ÿ‡ต Japan$11.0T8%
4๐Ÿ‡ซ๐Ÿ‡ท France$4.4T3%
5๐Ÿ‡ฌ๐Ÿ‡ง United Kingdom$4.3T3%
6๐Ÿ‡จ๐Ÿ‡ฆ Canada$4.0T3%
7๐Ÿ‡ฉ๐Ÿ‡ช Germany$3.7T3%
8๐Ÿ‡ฎ๐Ÿ‡น Italy$2.9T2%
9๐Ÿ‡ฐ๐Ÿ‡พ Cayman Islands*$2.7T2%
10๐Ÿ‡ง๐Ÿ‡ท Brazil*$2.4T2%
11๐Ÿ‡ฐ๐Ÿ‡ท South Korea*$2.2T2%
12๐Ÿ‡ฆ๐Ÿ‡บ Australia$2.2T2%
13๐Ÿ‡ณ๐Ÿ‡ฑ Netherlands$1.9T1%
14๐Ÿ‡ช๐Ÿ‡ธ Spain$1.9T1%
15๐Ÿ‡ฎ๐Ÿ‡ณ India*$1.3T1%
16๐Ÿ‡ฎ๐Ÿ‡ช Ireland$1.0T1%
17๐Ÿ‡ฒ๐Ÿ‡ฝ Mexico*$1.0T1%
18๐Ÿ‡ฑ๐Ÿ‡บ Luxembourg$0.9T1%
19๐Ÿ‡ง๐Ÿ‡ช Belgium$0.7T>1%
20๐Ÿ‡ท๐Ÿ‡บ Russia*$0.7T>1%

*Represent countries where total debt securities were not reported by national authorities. These figures are the sum of domestic debt securities reported by national authorities and/or international debt securities compiled by BIS.
Data as of Q3 2022.

As the above table shows, Japan has the third biggest debt market. Japanโ€™s central bank owns a massive share of its government bonds. Central bank ownership hit a record 50% as it tweaked its yield curve control policy that was introduced in 2016. The policy was designed to help boost inflation and prevent interest rates from falling. As inflation began to rise in 2022 and bond investors began selling, it had to increase its yield to spur demand and liquidity. The adjustment sent shockwaves through financial markets.

In Europe, France is home to the largest bond market at $4.4 trillion in total debt, surpassing the United Kingdom by roughly $150 billion.

Banks: A Major Buyer in Bond Markets

Like central banks around the world, commercial banks are key players in bond markets.

In fact, commercial banks are among the top three buyers of U.S. government debt. This is because commercial banks will reinvest client deposits into interest-bearing securities. These often include U.S. Treasuries, which are highly liquid and one of the safest assets globally.

As we can see in the chart below, the banking sector often surpasses an economy’s total GDP.

Banking Sector

As interest rates have risen sharply since 2022, the price of bonds has been pushed down, given their inverse relationship. This has raised questions about what type of bonds banks hold.

In the U.S., commercial banks hold $4.2 trillion in Treasury bonds and other government securities. For large U.S. banks, these holdings account for almost 24% of assets on average. They make up an average 15% of assets for small banks in 2023. Since mid-2022, small banks have reduced their bond holdings due to interest rate increases.

As higher rates reverberate across the banking system and wider economy, it may expose further strains on global bond markets which have expanded rapidly in an era of dovish monetary policy and ultra-low interest rates.

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