Bloomberg experts:

US interest, inflation and political chaos are the biggest risks to the world economy in 2022

  • A great danger awaits the global economy if the US Federal Reserve raises interest rates.

    archival

  • The coronavirus threat to the global economy is far from over.

    Reuters

  • The European economy may face impacts if Macron loses the presidential election.

    archival

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About two weeks before entering the new year, experts monitored a group of the most prominent risks threatening the global economy in 2022. At the same time, the economic developments that the world witnessed during the two years of the emerging Corona Virus (Covid-19) pandemic that did not end yet, showed the error of many expectations, which opens the door to the question of what could go wrong next year.

Analysts Tom Orlick, Maeva Kosin and Inda Curran, in an analysis published by Bloomberg News Agency, see that the potential mistakes in the coming year are many, and the risks facing the global economy are great.

In their economic analysis, the three analysts monitor the list of major risks facing the economy, which are represented in the new mutator of the emerging Corona virus (Omicron), the increase in US interest rates, the collapse of the Chinese real estate sector due to the Evergrande crisis, and the high rate of inflation in the world, especially food price inflation, and tensions Geopolitics and politics in Europe.

On the other hand, analysts point out that there are some bright spots in the new year, including: the abundance of cash among consumers thanks to the high rates of savings during periods of closure as a result of the spread of the Corona virus, the possibility of governments extending economic stimulus programs, and the continued adoption of an expansionary budget by the United States.

It's still early

It is too early to make a final verdict on the omicron, which appears to spread faster than previous strains of the emerging coronavirus, but is less dangerous in terms of death rates.

This could allow life to return to its pre-pandemic state.

On the other hand, the fear of the pandemic and the closure measures limit consumers' demand for many activities, such as restaurants and fitness centers, and push them to buy more food.

And if the balance returns to consumer spending again during the next year, the global economy may grow at a rate of 5.1% of GDP, and not at a rate of 4.7%, as Bloomberg experts predict.

closing procedures

Despite this, analysts warn that things may not go in this positive way, and a new, more dangerous strain of the virus may emerge that will force many countries to re-impose closure measures, which will have repercussions on the performance of the global economy.

And if closure measures are imposed during the next year for a period of only three months, the global growth rate could decline to only 4.2%.

At the beginning of 2021, it was expected that the year would end with an American inflation rate of about 2%.

But what happened is that the inflation rate has reached 7%.

Analysts expect that next year will end and the inflation rate will have fallen to the target levels, ie, in the range of 2%.

The mutant Omicron is one possible cause of inflation, and wages are rising rapidly in the United States.

At the same time, tensions between Russia and Ukraine could push natural gas prices even higher.

With the climatic disruptions caused by the phenomenon of climate change, global food prices may continue to rise.

Not all economic risks move in one direction.

While the outbreak of a new wave of the pandemic could harm the travel sector, for example, it will at the same time lead to a decline in oil prices, and thus inflationary pressures, which will put the world’s major central banks in front of questions that do not have easy answers.

warning

Experts warn that the US Federal Reserve (Central Bank) will raise interest rates and tighten monetary policy, to a severe blow to emerging markets.

The rise in US interest rates usually leads to a rise in the price of the dollar and the exit of financial investments, and perhaps to currency crises in developing economies.

In Europe, the solidarity of the leaders of the countries that support the European unity project, and the active role of the European Central Bank, helped in not raising the cost of borrowing for European governments, which contributed to overcoming the Corona pandemic crisis.

However, the influence of these two factors may fade into the new year.

The presidential election battle in Italy next January may threaten the fragile government coalition.

In France, opinion polls indicate that President Emmanuel Macron will face a strong challenge from the political right in the presidential elections scheduled for next April.

And if the anti-EU camp makes significant gains in the major European economies, the calm in European bond markets could be shattered, depriving the European Central Bank of the political support needed to deal with the financial crises.

turbulence wave

Finally, the rise in global food prices over the next year could lead to a wave of violent political and social unrest.

Hunger historically leads to social unrest.

The repercussions of “Corona” and the bad weather have led to a rise in food prices in the world to almost record levels, and their rise could continue during the new year.

The last food price crisis in the world in 2011 sparked a wave of widespread popular protests, especially in the Middle East.

Many countries in this region are still vulnerable to the crisis.

Indeed, Sudan, Yemen and Lebanon are experiencing strong pressures on food prices, and the three countries are currently experiencing the same risks they faced in 2011, and perhaps to a greater extent for some countries.

On the other hand, the situation in Egypt is somewhat better.

Finally, popular unrest and protests rarely remain within the borders of the countries in which they occur, meaning that the Middle East is in danger of widespread regional unrest.

• Analysts point out that there are some bright spots in the new year, including: the abundance of cash among consumers thanks to the high rates of savings during periods of closure as a result of the spread of the Corona virus, the possibility of governments extending economic stimulus programs, and the continued adoption of an expansionary budget by the United States.


• Analysts expect that next year will end and the inflation rate will have fallen back to the target levels, ie, within 2%.

The omicron is one possible cause of inflation, and wages are rising rapidly in the United States.


• If the anti-EU camp makes significant gains in the major European economies, the calm in European bond markets could be shattered, depriving the European Central Bank of the political support needed to deal with the financial crises.

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