Serial disruptions threaten global economic growth


Russia’s invasion of Ukraine, a wave of COVID-19 infections and lockdowns in mainland China, relentless inflation and tighter financial conditions have disrupted production and stifled demand, causing the market to stall. ‘Mondial economy. Led by services, growth is expected to resume at a moderate annual pace of 2.5% in the last two quarters of 2022, with the lifting of COVID-19 related restrictions in most regions. After a 5.8% rebound in 2021, global real GDP is expected to grow 2.9% in 2022 and 3.1% in 2023. This forecast is revised down by 0.3 percentage point in 2022 and by 0.2 percentage points in 2023, largely reflecting weaker growth prospects in mainland China. and the United States. While the global economic expansion is expected to continue at a slower pace, further geopolitical, financial or supply-side shocks could tip the global economy into recession.

As global price inflation peaks, its decline could prove painfully slow.

Global consumer price inflation fell from 5.3% year-on-year (y/y) in December 2021 to around 7.0% in May, a pace that is likely to continue through September. It will take time to ease the cost pressures that have built up over the past two years. Still, rising interest rates, slowing economic growth and improving supply conditions will provide some price relief. After hitting a record high in early March, the IHS Markit Materials Price Index fell 14% through mid-May, led by falling prices for metals, energy, chemicals and drink. A deceleration in consumer goods prices will follow, although resilient demand for services may delay the slowdown in services price inflation. Global consumer price inflation is expected to decline from an average of 3.9% in 2021 to 6.7% in 2022 before moderating to 3.7% in 2023 and 2.7% in 2024.

High inflation and rising interest rates have clouded the US economic outlook.

The Federal Reserve raised its key rate by 50 basis points at its May meeting and signaled more forcefully its determination to control inflation. The federal funds rate will likely reach a range of 3.00-3.25% in mid-2023. In anticipation of further monetary policy tightening, Treasury term yields rose sharply, as did spreads between corporate bond yields and mortgage rates. The dollar has appreciated while the S&P 500 index of stock prices has fallen 20% since the start of the year. Although household finances are generally in good shape, high inflation is eroding real incomes and making households more cautious about spending the savings they have accumulated during the pandemic. The boom in housing markets is waning and by the end of the year, companies will begin to rein in rising capital spending. Real GDP growth is expected to slow from 5.7% in 2021 to 2.4% in 2022 and 2023, down from our April forecast of 3.0% in 2022 and 2.8% in 2023. With real GDP growth below potential, the unemployment rate will rise from 3.6% in April to 5.0% by 2025.

Soaring energy prices could push Western Europe into recession.

Our May forecast already factors in a slight quarter-on-quarter contraction in Eurozone real GDP in the second quarter and a decline in UK real GDP in the last three quarters of 2022. Retail sales , industrial production and net foreign trade in the euro zone fell in March, as the fallout from the Russian-Ukrainian war weighed heavily on consumer and business confidence. On the bright side, the S&P Global PMI™ surveys showed robust growth in the services sector in April after pandemic containment measures were lifted. Our forecast remains below market consensus, with eurozone real GDP growth expected to slow from 5.4% in 2021 to 2.5% in 2022 and 1.8% in 2023. The prospect of further disruption in Energy supply, which is driving up prices, is a downside risk as the European Union plans to extend the embargo on energy imports from Russia to include petroleum and petroleum products.

COVID-19 restrictions have caused a major setback to mainland China’s economy.

After real GDP growth of 4.8% year-on-year in the first quarter, economic performance turned dismal in April. Industrial production and service sector output swung from expansion to contraction as lockdowns dampened consumer spending. Retail sales fell 11.1% year on year in April, while residential space sold fell 42% year on year. The closures, centered on Shanghai, have also disrupted port activity, causing a slowdown in previously robust export growth. As new COVID-19 cases appear to be declining and industrial activity is picking up, the government’s aggressive zero COVID policy will remain in place until 2022, preventing a return to normal and limiting the effectiveness of new stimulus measures fiscal and monetary. Thus, real GDP growth is likely to slow from 8.1% in 2021 to 4.3% in 2022, with real consumer spending growth declining from 5.9% in 2021 to just 2.2% in 2022. . Real GDP growth in Asia-Pacific excluding China and Japan is expected to slow from 5.4% in 2021 to 4.7% in 2022 and 4.5% in 2023.

The Russian-Ukrainian war will have lasting impacts on emerging Europe and the world.

Russia’s invasion of Ukraine on February 24 fundamentally changed the geopolitical landscape. Our forecast assumes that Russia is likely to continue its military attacks in the coming months, encountering strong Ukrainian resistance. The result could be a long geopolitical stalemate. In response to the sanctions and the withdrawal of foreign investment, Russia’s real GDP is expected to fall by 10.2% in 2022 and 1.4% in 2023 before beginning a slow recovery. After collapsing by 46% in 2022, Ukraine’s real GDP is likely to rebound by 30% in 2023 and 14% in 2024 as reconstruction continues, supported by substantial aid from Western allies.

Posted on May 24, 2022 by Sara JohnsonExecutive Director – Economic Research, S&P Global Market Intelligence

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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