IHS Markit: Global economic expansion will continue at a moderate pace in 2022 and 2023


KUALA LUMPUR (February 23): Global economic expansion will continue at a moderate pace in 2022 and 2023.

IHS Markit managing director of global economics Sara Johnson said with continued supply disruptions, inflation continued to beat expectations, prompting central banks to raise interest rates earlier.

“As demand growth slows and supply chain issues gradually resolve, inflation will come down.

Johnson said the IHS Markit Gross Domestic Product (GDP)-weighted global average of key interest rates is currently 1.8%, while global consumer price inflation is estimated at 5, 5% YoY.

“So real interest rates are very stimulative.

“Even with a series of rate hikes and moderating inflation in the coming months, real policy interest rates are likely to remain negative at the end of 2022,” she said.

Johnson said emerging Europe and Latin America had been at the forefront of raising interest rates, often under pressure from currency depreciation.

In both regions, a legacy of high inflation has increased the urgency for policy action to contain inflation expectations.

She said Brazil’s central bank had been the most aggressive, raising its key rate to 10.75% in early February from 2% a year ago.

“We expect two more increases to hit a high of 12% in April,” she said.

Johnson noted that after contracting 3.4% in 2020, global real GDP rebounded around 5.7% in 2021.

She said global growth would likely slow to 4.1% in 2022 and 3.4% in 2023 as fiscal and monetary policies tighten.

Johnson said the forecast for 2022 had been revised down by 0.1 percentage point, reflecting weaker performance in North America, Japan and Russia.

“Our forecast assumes that the Covid-19 pandemic will diminish in significance as vaccination rates increase and effective treatments become more widely available, allowing economies to remain open.

“Global consumer price inflation rose from 2.2% in 2020 to 3.9% in 2021 and will likely hit a 14-year high of 4.6% in 2022.

“Goods price inflation is likely approaching its cyclical peak and should ease as agricultural and industrial commodity prices decline,” she said.


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