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The slowdown in China and the United States will slow global growth in 2022 (IMF) – La Tribune


The horizon at the end of the tunnel is still far from clearing. After more than two interminable pandemic years, the global economy enters 2022 in a thick fog. The appearance of the Omicron variant last November in South Africa and the mess in the supply chains continue to disrupt the functioning of the economy.

The spread of this variant on all the continents has forced the States to once again strengthen the restrictive measures even if they are less drastic than during the years 2020 and 2021. To this are added the inflationary pressures which are multiplying all over the planet.

In this degraded health context, the International Monetary Fund (IMF) has revised down its gross domestic product (GDP) growth forecast for 2022 to 4.4% from 4.9% last October, a drop of 0.5 points.

In search of pre-crisis growth

After a dizzying fall in 2020 (-3.1%), global growth rebounded well last year to 5.9%. Despite advances in vaccination, the prolongation of the health crisis is constantly postponing the return to a pre-crisis growth trajectory.

After the World Bank a few days ago, Chief Economist Gitah Gopinath believes in a blog post that “The continued global recovery faces multiple challenges as the pandemic enters its third year. The rapid contagion of the Omicron variant has led several countries to take further restrictions on mobility and increased shortages labor.”

Gitah Gopinath will leave his place in a few weeks to the Frenchman Pierre-Olivier Gourinchas at the helm of macroeconomic research at the institution based in the United States.

French economist Pierre-Olivier Gourinchas takes the reins of research at the IMF

The United States presses the brake, the IMF sharply downgrades its forecasts (-1, 2 points)

Clouds are now gathering over the US economy. After an abysmal plunge in 2020 (-3.4%), the engines of the American productive apparatus nevertheless ran at full speed in 2021 (5.6%). The rapid advances in vaccination after the arrival of Joe Biden in the White House and the support measures for American families have enabled consumption to pick up again.

Despite the announcement of massive investment plans intended to modernize infrastructure and ensure the energy transition as part of the famous “Build Back Better”, the Democratic head of state has had to face violent opposition in Congress.

Added to this is the sharp rise in consumer and producer prices. US Federal Reserve Chairman Jerome Powell announced a tightening of monetary policy after injecting billions of dollars into the economy and major debt buybacks at the start of the health crisis. Results, the IMF has significantly revised its growth forecasts downwards to 4% against 5.2% last October.

Joe Biden’s expansionary fiscal policy could come under severe strain ahead of the midterm elections at the end of the year. Indeed, the Republicans and the pro-Trump are likely to want to block the various reforms of the Head of State while taking advantage of the divisions within the Democratic camp.

China on the decline

As for the engine of global growth, the Chinese economy is expected to slow down sharply in 2022. After peaking at 8.1% in 2021, expected GDP growth is 4.8% this year versus 5.6% in last fall’s projections.

The persistence of the pandemic in many regions in China and the zero-covid policy applied by the authorities have largely contributed to slowing down the activity of the planet’s industrial engine. The setbacks of real estate giant Evergrande in the fall also raised serious concerns among investors. The imminent arrival of the Olympic Games in February and the major five-yearly meeting of the Communist Party next November should not encourage the authorities to loosen the screws on health measures.

“A slowdown in China will affect the global outlook, primarily via goods-exporting businesses and emerging markets,” explain the economists in their summary.

“Reduced spending in the real estate sector and a stronger than expected drag on private consumption also limited growth prospects,” they add. Monetary easing with lower rates and credit facilities for SMEs should enable Chinese activity to rebound during the first quarter.

Europe is slowing down more than expected

On the Old Continent, the spread of the Omicron variant and the outbreak of contamination have darkened the economic horizon. The latest geopolitical tensions in Ukraine on the doorstep of Europe could also hit activity in economies dependent on Russian gas.

READ ALSO | Tensions in Ukraine: energy, Germany’s Achilles heel against Russia

Growth on the Old Continent could drop from 5.2% in 2021 to 3.9% in 2022 and 2.5% in 2023. The IMF has revised down its GDP growth forecast for this year by 0.4 point compared to last autumn. All major eurozone economies have seen IMF projections downgrade. Among the most marked falls is Germany (-0.8 points).

The first economy in the euro zone should nevertheless see its GDP increase between 2021 and 2022 by 2.7% to 3.8%. Although the rebound last year was less spectacular than that of France (6.7%), it should nevertheless be remembered that the plunge in activity in Germany was much less violent. On the other hand, industry across the Rhine is still entangled in serious supply difficulties. Given the weight of industry in Germanic GDP, the engines of the productive apparatus are still likely to cough for the new coalition in power which arrived at the helm of the federal state at the end of last year, succeeding Angela Merkel.

In France too, GDP growth could be less robust than expected. After an abysmal fall (-8% in 2020) and a partly mechanical rebound of 6.7% in 2021, growth should slow more than expected according to the IMF. Washington-based economists expect growth of 3.5% this year from 3.9% in October 2021.

Here again, the outbreak of contamination and feverish energy prices clouded the growth figures at the end of the year. The health situation remains particularly alarming despite a relatively high rate of vaccination of the population. In southern Europe, activity should also be less robust than expected. Italy (3.8% in 2022) and Spain (5.8% in 2022) also saw their growth figures revised downwards (respectively by -0.4 point and -0.6 point).

Persistent inflation

The economic catch-up following the deep recession of 2020 and the rise in oil and commodity prices have raised the specter of inflation in the United States and other rich countries. In total, the IMF expects the price index to rise by 3.9% in 2022 against 3.1% in 2021 and 0.7% in 2020 in advanced economies. Inflation should mark time from 2023 at 2.1%.

As for the emerging economies, inflationary pressures should accelerate further this year to 5.9% (5.7% in 2021) before slowing down from 2023 (4.7%). The International Monetary Fund considers that “This high inflation is likely to persist longer than expected relative to the October forecast due to disruption in supply chains and continued high energy prices in 2022.”