Omicron, energy price fever, disrupted world trade … the world economy is still in troubled waters. More than two years after the discovery of the Covid on Chinese soil, many sectors continue to tremble. The appearance of the Omicron variant in South Africa at the end of November 2021 has once again clouded the outlook. In its latest forecasts unveiled on Tuesday, January 11, the World Bank is counting on a slowdown “Pronounced economy due to recent threats such as variants of the Covid and rising inflation, income inequalities which could endanger the recovery in emerging countries and developing economies”.
The growth of the global gross domestic product (GDP) could thus pass from 5.5% in 2021 to 4.1% in 2022 and 3.2% in 2023. Statisticians have thus lowered their growth figures compared to the fall 2021 by 0.2 point for 2022 and 0.1 point for 2023.
“The global economy has to deal simultaneously with Covid 19, inflation, and political uncertainty, with government spending and unconventional monetary policies. Rising inequalities and security challenges are particularly harmful for developing countries ”, said the president of the global institution David Malpass.
Emerging economies far from regaining their pre-crisis level
The first threat hanging over the international economy is the risk of great “divergence” according to the World Bank. This great slowdown comes at a time when growing disparities appear between “The growth rates of developed countries and those of emerging and developing countries”, experts note. Economic growth in rich countries should therefore drop from 5% in 2021 to 3.8% in 2022 and 2.3% in 2023. This slowdown should nevertheless be sufficient to “Return to production and investment levels before the pandemic”.
In poorer countries, even if growth rates are expected to be higher in the coming months, the effects of the crisis are likely to drag on and on. Indeed, the international organization explains that the level of production in emerging countries should always be 4% lower than its pre-crisis trend by 2023. In even more vulnerable countries exposed to conflicts, for example, he gap could be even more staggering (-7.5%).
Unlike the large Western countries, many States did not necessarily have the means to implement emergency measures in order to protect their productive fabric and their workforce. Large numbers of people who had lost their businesses in 2020 when the virus spread have not been able to find jobs.
Europe limits the damage
The Old Continent should record weaker growth than expected in 2022. The World Bank now expects growth in produced wealth of 5.2% in 2021 (+1 point compared to the autumn forecasts), 4.2% (-0.2 point) in 2022 and 2.1% (-0.3 point) in 2023. After having experienced a violent plunge in 2020 (-6.4%), the economy of the euro zone has rebounded strongly in 2021.
In addition to the economic rebound, the acceleration of immunization and budget support measures in most countries have allowed the engines of the economy to pick up more quickly. The accommodating monetary policy of the European Central Bank (ECB) has also favored the financing of the economy through massive asset buyback policies (PEPP or emergency program in the face of the pandemic). This rebound phase should however come to an end this year. The explosion of the Omicron wave at the end of 2021 destabilized certain sectors in the services even if the restriction measures are less severe than in previous waves.
The declining American economy
One year after the arrival of Joe Biden at the head of the White House, the American economy is in decline. GDP growth is expected to drop from 5.6% in 2021 to 3.7% in 2022 and 2.6% in 2023. Even if this level remains relatively high, the downward revision of the economists of the World Bank is the most high in developed countries with 1.2 points less for 2021 and 0.5 points less for 2022.
After the US economy rebooted in haste last year, the Biden administration faces numerous hurdles in Congress to get its sweeping investment programs passed. The Democratic president must in particular face some opposition in his own camp and especially that of the Republicans in Congress. The economic policy of the Head of State, which aims in particular to support demand and modernize the American economy by Green Deal and an infrastructure investment plan, could still be roughed up by the mid-term elections scheduled for the end of 2022.
Slowdown in China
The Chinese economy is stepping on the brake. After peaking at 8% in 2021, China’s gross domestic product is expected to fall back to 5.1% in 2022 and rebound slightly to 5.3% in 2023. Here again, the World Bank’s economic outlook has revised lowering their forecasts by 0.5 point for 2021 and 0.3 point for 2022 compared to their previous estimates.
Last fall, Beijing had to face the bankruptcy of a real estate giant (Evergrande) attracting the eyes of the whole world and the fears of investors. If a risk of contagion to the rest of the global financial system seems ruled out, the health situation is far from being appeased in the Middle Kingdom. The Chinese authorities recently decided to implement new containments in certain regions to once again face the surge in contaminations. These draconian confinements in the name of the zero Covid health policy could weigh on activity in some provinces. Internationally, the slowdown from the Asian giant should dampen global demand.
“2022 will be a year of normalization of the world economy” (Christophe Barraud, Market Securities)
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