Geopolitical tensions, energy crisis and rate hikes: what 2022 will be remembered for in the global economy

In 2022, global economic growth has almost halved.

This conclusion was made by experts from the International Monetary Fund (IMF).

As the organization calculated, if at the end of 2021 the volume of global GDP increased by 6% at once, then over the past 12 months the indicator has added only 3.2%.

Moreover, in 2023 the value may be even lower and amount to about 2.7%.

“The latest figures indicate the possibility of a further decline (global GDP growth rates. -

).

We are also facing very high uncertainty,” IMF Managing Director Kristalina Georgieva said on December 9.

According to her, recently the global economy has faced a series of shocks.

Thus, the coronavirus pandemic was followed by a special operation in Ukraine and a rapid acceleration of inflation in most countries.

This, in turn, led to a cost-of-living crisis and tightening global financial conditions.

A similar point of view is shared by World Bank President David Malpas.

According to him, in the current conditions, the future prospects for the international economy remain difficult.

“The world is in danger of plunging into a global recession.

This is fraught with years of slow growth and wide revision of asset prices,” Malpas said.

Sanctions storm

One of the main events of 2022 was the start of a special operation in Ukraine, says Alexander Abramov, head of the laboratory for the analysis of institutions and financial markets at the Institute for Applied Economic Research of the RANEPA.

According to the interlocutor of RT, large-scale hostilities and the events that followed them had a significant impact on the economy of both Russia and the whole world.

Recall that at the end of February, Russian President Vladimir Putin announced the recognition of the independence of the DPR and LPR, and later announced the start of a special military operation to protect the Donbass republics from aggression from Ukraine.

In response, the United States, the European Union and a number of other states began to impose unprecedented economic sanctions against Moscow.

In total, over the past ten months, unfriendly countries have already introduced about 10.4 thousand anti-Russian restrictions.

At the same time, almost 13.1 thousand restrictive measures are now in force against the Russian Federation - more than against Iran, Syria, North Korea, Venezuela, Myanmar and Cuba combined.

This is stated in the materials of the global sanctions tracking database Castellum.AI.

Restrictions, in particular, affected the banking industry, the financial and energy sectors, aviation and trade.

At the same time, Western countries froze almost half of Russia's gold and foreign exchange reserves (worth $300 billion), and many international companies announced their withdrawal from Russia.

Initially, large-scale restrictions against Moscow provoked a panic in the financial and consumer markets of Russia.

Against this background, the ruble exchange rate collapsed to record levels, and the population began to massively buy food and goods.

Already in April, inflation in annual terms accelerated to almost 18%, the highest level in the last 20 years.

However, due to the measures taken by the country's leadership, the rate of price growth has already slowed down to 12.4% in annual terms.

In the meantime, the ruble has not only managed to recover from losses, but, as Vladimir Putin said in December, has become one of the strongest currencies in the world since the beginning of the year.

“This result was achieved due to our decisions to regulate capital outflow, to transfer gas payments to rubles, to actively use national currencies in trade with partners, but above all, of course, through a responsible financial policy.

Russia's public finances remain stable," the president said.

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Moreover, according to the head of state, back in the spring, many experts predicted that in 2022 the Russian economy would shrink by 20% as a result of sanctions.

However, according to the latest estimates by the authorities, the decline in GDP will be only about 2.5%, which is even less than in the pandemic 2020 (2.7%) and the crisis 2009 (7.8%).

“Unprecedented sanctions aggression has been launched against Russia.

It was aimed at, in a short time, essentially crushing our economy, through the robbery of our foreign exchange reserves, to collapse the national currency - the ruble - and provoke destructive inflation.

This calculation, as we see, as, in fact, everyone sees, did not come true, ”Vladimir Putin stated.

As Anatoly Aksakov, chairman of the State Duma Committee on the Financial Market, told RT, at the moment the Russian economy continues to work stably.

A number of enterprises are increasing their output, exporters are reorienting the supply of goods and raw materials from the West to the East, and most of the companies that left the country have begun to return.

As a result, already in 2023, the Russian GDP may return to growth, the deputy did not rule out.

“By the end of the year, the situation improved, so I look at it with optimism, expecting that next year there will even be growth.

And this is not only my opinion, but also many experts.

Let the growth be small - about 1.5%, but this is still a movement forward, ”Aksakov emphasized.

Embargo effect

In an attempt to put pressure on Moscow, Western states began to massively refuse to purchase Russian oil.

The United States was the first to announce such a decision, then Canada, Australia and the United Kingdom joined the initiative, and later the European Union introduced a partial embargo on supplies.

Initially, for example, the United States authorities stated that they could afford to take such a step thanks to the country's strong energy infrastructure.

Meanwhile, OPEC warned of the danger of such initiatives, since today there are no free capacities in the world to replace oil from the Russian Federation.

Ultimately, Western sanctions against Russia led to a worsening deficit in the global oil market.

As a result, the price of benchmark Brent crude on the London ICE exchange briefly rose above $139 a barrel, the highest level since 2008.

Against the backdrop of the rapid rise in oil prices, many countries are faced with a rush increase in fuel prices and, as a result, a record increase in prices for goods and services.

So, for example, at some point, inflation in the United States for the first time in 40 years rose above 9%, and in the European Union the value reached 11.5% - the highest level in history.

“Thus, the anti-Russian restrictions of the West and countermeasures of Moscow contributed to the acceleration of inflation around the world.

In fact, the United States, together with its allies, has put political ambitions ahead of its economy and the well-being of its own citizens.

Moreover, the negative effect affected the European Union the most, ”said Alexander Razuvaev, a member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers, to RT.

It is noteworthy that the increase in oil prices in the EU was accompanied by a record rise in gas prices.

Thus, during the year, the cost of this type of raw material at the TTF hub in the Netherlands for the first time rose above $3.8 thousand per 1 thousand cubic meters.

m. The reason for this dynamics was also the reduction in fuel supplies from Russia.

The pumping of gas from the Russian Federation through the Yamal-Europe pipeline was stopped due to restrictions from Poland.

In turn, Ukraine halved the transit of fuel from Russia to the EU through its territory, and in early autumn, the transportation of raw materials through Nord Stream 1 was stopped, since the sanctions of Canada and the European Union led to problems with the repair of equipment for the highway.

Moreover, at the end of September, a series of explosions occurred on three lines of the Nord Stream system - and the pumping of gas through these gas pipelines became impossible.

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• © Danish Defense Ministry

It is curious that against this background, the United States began to actively sell its liquefied natural gas to Europe.

However, the cost of supplied LNG turned out to be three to four times higher than in the US market.

The rapid rise in gas prices in the European Union has led to a sharp increase in the cost of electricity.

As a result, many European enterprises have been forced to close or start moving their production to other countries, including the United States.

Moreover, the deterioration of the economic situation in Europe turned into a record collapse of the regional currency.

So, in early autumn, the euro on the world market for the first time in 20 years was cheaper than the dollar.

“Despite all their oaths of fidelity, love to the grave and mocking promises to bring all income exclusively “to the family”, it turns out (Washington. -

) brazenly lied to his hateful Europe.

He does not even think about sharing profits.

On the contrary, it takes the last thing from an elderly partner and appropriates it for itself without the slightest hesitation, ”Deputy Chairman of the Security Council of the Russian Federation Dmitry Medvedev wrote in Telegram in November.

wobbly ceiling

In 2022, for the first time in 2022, the West decided to resort to non-market instruments to combat the rise in energy prices and set a ceiling on prices for Russian oil.

Thus, the European Union and the G7 states have banned their companies from transporting raw materials from Russia to third countries if the cost of one barrel exceeds $60.

In addition, the EU plans to limit the price of natural gas to $2,000 per 1,000 cubic meters.

m, but not only for Russia, but also for other suppliers.

The mechanism should start working in February 2023.

“This is the road towards the destruction of global energy.

There may come a time when the underinvested industry will no longer provide the market with the required volume of products, and then prices will skyrocket and hurt those who are trying to introduce these tools, ”said Vladimir Putin.

Russia is going to ban the export of energy resources to those countries that will join the price restrictions.

At the same time, the reduction in the supply of raw materials from the Russian Federation risks turning into an even more serious increase in world prices for hydrocarbons, the authorities are sure.

Thus, according to Dmitry Medvedev's forecast, in 2023 oil prices may rise to $150 per barrel, and gas prices up to $5,000 per 1,000 cubic meters.

m.

Interest risk

In an attempt to curb inflation, developed countries in 2022 began to sharply tighten their monetary policy.

For example, the US Federal Reserve System (FRS) in 2022 raised its interest rate seven times - from 0-0.25% to 4.5-4.75% - the highest level in the last 15 years.

In turn, the European Central Bank raised the rate four times and brought it to 2.5% for the first time since 2008.

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• © Hans-Peter Merten

Traditionally, tightening monetary policy is considered one of the main tools in the fight against rising prices.

As a result of higher rates, borrowed money becomes more expensive for citizens and businesses, economic activity weakens, which puts pressure on inflation.

However, in the current environment, such actions by regulators may pose an even more serious threat to the global economy, experts say at the United Nations Conference on Trade and Development (UNCTAD).

According to experts, over the past ten years, the central banks of developed countries have kept interest rates "at an ultra-low level", but have not been able to achieve a qualitative growth of their economies.

Now regulators have to raise rates in order to contain prices, but this is fraught with a new global crisis, according to UNCTAD.

“Changes in the monetary and fiscal policies of advanced economies could push the world into a global recession and prolonged stagnation, causing more serious damage than the financial crisis of 2008 and COVID-19 in 2020,” the organization said.

A similar point of view is shared by the chief analyst of Teletrade, Mark Goykhman.

In his opinion, the prospects for a global recession are becoming more and more real, especially in developed countries.

At the same time, the state of affairs in the Chinese economy will play an important role for world markets, the source said.

“The aggravation of the coronavirus in China brings a certain negative to the market situation.

The quarantine introduced in the country as part of the zero tolerance policy for COVID-19 slows down the economy of the Middle Kingdom and leads to a reduction in global demand,” Goykhman explained.

However, as Alexander Abramov noted, Beijing has recently begun to gradually lift the previously introduced restrictions.

If this trend continues, the expected global recession may be less severe, the economist said.

“With a probability of 80%, a recession is possible in developed countries such as the US, the EU, Britain and Japan.

Perhaps there will be a recession in China, but everything will depend on the situation with the coronavirus in China.

However, I think that the global recession will not be very deep, but most likely longer than at the beginning of the pandemic,” Alexander Abramov concluded.