The world economy in 2022 is waiting for stagflation (decline in activity at high inflation), since Russia’s war against Ukraine has limited the restoration of the economy after the coronavirus pandemic, showed a study conducted by Financial Times in conjunction with experts of the Buking Institute, transfers Interfax.
Experts believe that most countries will face the increase in price pressure, weakening GDP and the fall in business and consumer confidence. “The current year can be a complex period of geopolitical regrouping, sustainable failures in supplies, as well as volatility in financial markets, and the background for all this will be the growing inflation pressure and the lack of space for maneuver in politics,” said Senior Researcher of the Buking Institute Esvar Prasad.
The consolidated activity index, calculated by the FT and the Burukin Institute, shows a significant impulse loss to growth since the end of 2021 in the economies of developed countries and Emerging Markets while reducing the levels of trust and decline in financial markets. Serious difficulties are waiting for both the United States and China, and Europe, said Prasad.
Although consumer spending in the States remain strong, and the labor market returned to the dock conditions, high inflation is a serious problem for the Federal Reserve System (Fed), which is part of the mandate of which is to maintain pricing stability. In March, inflation in the United States reached 8.5% in annual terms, which is the maximum from December 1981. Prasad noted that there is a real risk that the Fed loses control over inflation, and it may have to toughen politics even faster than she signaled, which carries the threat of a sharp slowdown in economic growth in 2023.
The problems of China are associated with the “zero tolerance” strategy of the PRC authorities to COVID-19. In the first quarter of 2022, the growth rate of the Chinese economy unexpectedly accelerated compared with the previous quarter, despite tough quarantine restrictions. According to state statistical management (GSU) of the PRC, the volume of GDP in January-March increased by 4.8% compared with the same period of the previous year. Experts surveyed by Trading Economics, on average, expected an increase in GDP by 4.4%.
According to Europe, in the event of Europe, serious risks for the economy represents war in Ukraine, which affects it more than others, as well as the ingotent of the region to reduce its dependence on energy exports from Russia. Prasad at the moment does not see fast solutions for these problems.
According to Prasada, to keep the global economy at an acceptable trajectory of growth, considerable actions will be required to overcome the main challenges, including measures to limit the problems caused by pandemic, steps to suppress geopolitical tensions, as well as target measures, such as infrastructure expenses , to increase long-term performance instead of strengthening short-term demand.