It has plummeted for a long time ever since the COVID-19 pandemic started. However, the trends recently started changing for the better. What has been happening to the world economy lately? Or after 2022 started? Where are we going financially? We are going to discuss all the economic conditions worldwide in this article.
On the other hand, you can comprehend the state of the global economy if you are aware of daily economic news updates. Staying updated helps you understand the economic trend and provides useful information from the national and global economic backgrounds.
Uneven Progression of Global Economy
The trends in the global economy have been varying across regions in recent years, and 2022 is no different. With each wave of the COVID-19 pandemic, each region is getting affected and responding differently. In the end, it all comes down to the trading relationships to determine the economic stature of different places.
The COVID-19 Delta variant has slowed down spending in the US for consumers and also curtailed the production output in the Asian region. As a result, the world GDP growth fell to 2.2% in the third quarter of 2021 from the annual 4.6% quarter on quarter (q/q) in the second quarter.
As vaccination rates and advancements in treatment, customer spending rebalances to services from goods, and business adaptations rise, the constraints on growth due to the pandemic are easing up gradually. There has been a recovery in tourism and travel. The service sector has also continued to accelerate and grow in 2022.
Global growth is forecasted to settle at 3.4% in 2023 and 3.2% in 2024 as long as the suppressed demand is met, employment statuses are recovered to the highest potential, and the policies (monetary & fiscal) are tightened. Unfortunately, inflation pressures are projected to gradually subside since shipping bottlenecks and supply shortages continue to persist this year and are expected to stretch beyond.
Output prices and input costs have risen steeply due to the absurdly long delivery periods (highest in October 2021). Buyer resistance has also been on the rise since input costs have been getting passed on to customers at rates like never before.
Industries electronics, vehicles, communication, and computer equipment have also been experiencing rising prices due to semiconductor shortages. Electrical steel has been in short supply and will possibly continue to be short through 2023 as a result of BEV (Battery Electric Vehicle) productions. This, in turn, has caused serious increases in the prices of anything with motors, generators, and transformers, including electrical appliances, machinery, and equipment required to generate and transmit power.
On the bright side, a broad and visible price correction is developing in the commodity markets.
The consumer price inflation rate rose to 3.7% in 2021 from 2.2% in 2020, the highest since the 5% in 2008. The inflation rate for consumer prices is projected to reduce to 3.5% by the end of 2022 and to 2.7% by 2023-2024.
The US economy proved to be resilient, with substantial gains in industrial production and consumer spending during the final quarter of 2021. Labor earnings have been rising at a steady rate. Higher inflation rates haven’t yet impacted the spending behavior of customers. The real GDP growth rose to 4.4% in the 4th quarter of 2021 from the annual 2.0% q/q in the 3rd.
Compared with the global status, the US economy is most closely aligned. The real GDP of the United States contracted to 3.4% in 2020 and is expected to increase to 4.3% in 2022. Further projections suggest it is likely to fall to 3.5% again in late 2022 and early 2023.
The growth prospects for Eurozone have been declining after the growth spurt in mid-2021. Pandemic restrictions have been relaxed significantly, resulting in a surge of real GDP rate rising to 8% q/q annually in the 2nd and 3rd quarter of 2021. Energy costs have been at an all-time high, causing growth to slow down abruptly.
Eurozone GDP is projected to increase by 3.7% in 2022 and 2.2% in 2023, after the 6.4% decline in 2020. Prospects of medium-term growth for European countries are more promising even though pandemic tolls have been significantly heavy. In death rates per capita due to COVID-19, 17 of the top 20 countries are from the European region.
They are rebooting slowly after long-term declines. In the 3rd quarter of 2021, their real GDP rose to 4.9% year on year (y/y). The deleveraging campaigns by the government have deflated construction and real estate activity.
Increased regulations and diversified sourcing by multinational companies plummeted productivity growth. The worst power crunch in mainland China is apparently over since the state energy companies were prompted to increase producing and importing coal. The real GDP growth for mainland China has slowed to 5.5% for 2022-2023 from the 8.1% in 2021.
The manufacturing industry in the Asia Pacific has been slowly climbing back due to the accelerations in India, Thailand, and Indonesia with the decline of the Delta variant of COVID. This manufacturing output recovery in the Asia Pacific has improved supply chain disruptions globally. Since the 3.8% decline in 2020 and 4.5% increase in 2021, Asia Pacific is projected to see real GDP growth of 4.7% in 2022.
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With the overall pandemic situation slowly improving and worldwide adjustment measures becoming increasingly effective, the world economy has been gradually improving. The new Omicron variant of COVID has been stirring up some trouble again. Fortunately, the world economy has seen enormous paradigm shifts and is at such an evolved stage that it hasn’t been affecting the slow recovery much. Hopefully, the world economy can be resilient enough to maintain the rebounds.