Outlook for the year 2022: Post pandemic era or the continued new normal?
The coronavirus pandemic has officially entered its third year of existence with this new year, 2022. With the cases slowly increasing once again worldwide, the outlook for 2022 is challenging yet optimistic. The most significant consequence of the coronavirus pandemic on the economy on a global level has been the surge in inflation across countries. This has been due to the financial support provided by the governments to households and businesses over for the lockdowns that resulted in heavy losses, especially in 2020.
The U.K. is experiencing inflation near 5 percent, whereas the U.S. has already crossed the 7 percent mark. Energy prices have also increased; the rise in fuel prices and increasing bills in restaurants and hotels have also contributed to the ever-increasing inflation in the United Kingdom and the whole world. Supply chain restrictions have led to a shortage in products and services with people being laid off, which has also caused a deficit in the staff.
2022 global expectations
Inflationary pressures are prevalent as of now. However, they are expected to ease a little as months pass by. At least 12 months from now is anticipated for the inflation to go back to where it was, at 2 percent. Bank of England has been aiming to bring back inflation to its usual stage by encouraging an increase in interest rates that would help bring down the inflationary pressures in the U.K. economy.
The biggest challenge that the central bank across the globe is facing right now is to prevent the economies from overheating due to inflation but not to increase interest rates to such an extent that it triggers a recession. It is a complicated situation that needs nothing but precision and quick yet vital decisions. Central banks are moving forward by tightening their monetary policies in the coming year with a moderate rise in the interest rates in the U.K. and other major economies like the United States of America.
However, the recent coronavirus variant – Omicron, has contributed to the expansion of the complication with respect to raising interest rates but not so much to avoid recessionary pressures. Amidst all the confusion, the Bank of England was able to increase its interest rates from 0.1 percent to 0.25 percent as its first step towards curbing inflation.
Talking about Asia, China was among the first countries to recover from the pandemic in 2020, but 2021 and current times speak differently. The momentum in the Chinese economy has been lost, and the biggest reason for the same is the urbanization rate in China matching that of Germany’s, at over 65 percent. The Chinese population’s dependency ratio is more than 50 percent now, which means that there are more children and old people in the economy compared to the working-age group. The Chinese market is now more established than ever, expecting a GDP growth of about 4.5 percent every year, contrary to its previous year growth percentages that have consistently hovered around 6 to 7 percent. Equities in the Chinese market are expected to remain cheap without much fluctuation in the prices over the year, and the overall outlook seems optimistic in the near future.
The growth of the global economy in 2022 is expected to be moderate, without much higher swings or lower troughs. However, the growth is expected to be more than the average of the previous two years. Extensive lockdowns witnessed in 2020 are most likely to not return even in extreme cases, and lockdown restrictions will only ease as time passes, with targeted measures in force. Hence, supply chain disruptions are expected to continue leading to a price surge in the commodities market.
The global growth is expected to be around 4.6 percent in 2022, with an ease in the inflation rate bringing it down to 2.6 percent. It is also likely that automobile, electronics, medical care, and housing are some of the topmost industries to be affected by a price surge this year.
Concluding the growth forecast of 2022, we want to mention that people all across the globe have now adapted to the ongoing pandemic. Humans, along with businesses, have learned how to deal with and adjust to pandemic conditions. This implies a much less severe impact of lockdowns on the economy in the coming months or years, whatever timeline the virus has chosen for its next outbreak.
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