Covid-19 has proven that we need to confront profound holes in the global economic system. But without strong economic growth, the world will struggle to rise above the Disease, let alone reform the global economy in ways that are better for everyone. In 2022, global economic growth will stagnate, with expansion in many developed and developing economies failing to reach the critical 3% threshold needed to double income per capita in the coming years. one generation.
Next year, restarting global economic growth will also be difficult as major regions of the world remain underpowered and global trade and investment continue to be disrupted.
To further complicate matters, the tools that governments typically use to initiate recovery are already widely used, and policy’s ability to promote growth is reaching its limits. Interest rates have been stuck at historic lows in the US and UK, and at negative rates in Europe and Japan. Many countries are heavily indebted. In 2020, the debt-to-GDP ratio in the US and UK is over 100%.
This increased national debt ratio is likely to constrain public spending and the ability of governments to provide public goods such as education, health care, infrastructure and national security, reducing the meaningful economic growth.
Even before the pandemic, factors were hampering economic growth. In 2022, these things will continue: the rise of automation and technological advancement, which can lead to mass unemployment; demographic changes, including rapid population growth; climate change; and exacerbate inequality.
The emergence of a global pandemic has increased many of these concerns, further complicating the ability of governments to promote economic growth in a fair and sustainable manner. Uneven immunization rates around the world – largely between the developed and developing world – continue to fuel inequality and delay economic recovery. In Africa, home to almost 20% of the world’s population, vaccination rates are hovering around 1%. It is likely that people in many parts of the emerging world will remain largely unvaccinated through 2022, increasing their exposure to new and more infectious variants.
Given the integrated nature of the world economy, the fact that emerging economies will not be able to experience the economic recovery seen in many developed regions next year in 2021 means that global growth will continue to grow. demand will remain low and slow. Many advanced economies have enjoyed a restart built on mass vaccinations and government stimulus packages. However, this recovery will not be sustainable if emerging economies also recover. Developed countries cannot maintain their economic position if they cannot sell goods and services abroad.
Next year, we will see more clearly how intertwined the fates of the global economy are and realize that any hope of a global economic recovery cannot be achieved as long as developed countries and is still developing in two different directions.
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