After a disruptive 2021, what are the economic factors to look at in 2022?

Highlights 

• 2021 was the year of economic disruptions.
• Economic factors like inflation and interest rate changes can play a crucial role in shaping the world economic status in 2022.
• While there are hopes of recovery, with Omicron cases on the rise- the pandemic might take a gruesome turn.

The COVID-19 pandemic is not loosening the noose. The terror that began early in 2020 is still clenching onto the world economy. It took months to recover from the first wave, then the second wave hit and now the third wave inflicted by the Omicron variant seems to be delaying the dawn of recovery.

2021: The year of economic disruptions

The year began with extreme cold weather, which induced high energy demand and thus the electricity prices surged in most countries. Other reasons for the rise in power cost has also been because of supply-chain disruptions due to the pandemic.

Additionally, countries like Sri Lanka announced national food insecurity. Several countries drowned with national debts and rising inflation. Additionally, according to the IMF, ever since 2020, the global debt has increased significantly, in 2020 it reached about 250% of world GDP (USD 226 trillion) and it’s still growing.

Then, the US hit high-inflation and simultaneously the Great Resignation barged in. Prices of essential commodities shot up high in many countries; thus, making the vulnerable suffer the most. The world also experienced an energy and financial crisis following China’s Evergrande’s big fallout.

GOOD SECTION: The Great Resignation: Will it continue in 2022?

Now, as we have entered a new year. Let’s look at the factors that play a crucial role in shaping the world economic status in 2022.

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World economy in 2022: factors to look at

Economists, politicians, and the industry leaders were hopeful of 2022. However, with the sharp surge in Omicron cases worldwide; it is difficult to say whether the world economy would see the dawn of recovery this year.

Omicron will surely have a significant impact, with the demand in the hospitality, and travel business going down already. Several countries may impose lockdowns- a bad sign for a full-fledged recovery.

The first significant factor to look at in 2022 is inflation. Will the world economy face shooting prices in 2022? Additionally, to combat the inflation crisis, several central banks like The Bank of England have increased their interest rates. However, the European Central Bank and Federal Reserve and Bank of Japan are restraining from raising interest. But this is only circumstantial.

Secondly, politics and global trade. It seems like the trade war between the US and China will continue in 2022 as well. The “phase 1” of the US and China deal has expired, in which the targets were missed by 40%. Now, it is yet to be known if there will be a “Phase 2” of the deal. Additionally, it is expected that Asia will be a significant part of economic growth in 2022.

Federal elections play a significant role too. Australian federal elections are going to take place in 2022. Which party is in power has a huge impact on the trade and geopolitical relations across countries? It is yet to be seen if the world economy will be dominated by liberal agendas or conservatism.

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Bottom line

Hopefully, 2022 won’t be as drastic as 2020 and 2021. There are hopes of recovery, but the virus might take a gruesome turn as well. However, the above factors will play a  key role in framing the path of global economic structure in 2022.