Slower growth, surging inflation, rising geopolitical risks and an accelerating deglobalisation trend are factors shaping the global economic, financial and trade landscape in 2022 and beyond. Despite the challenges, there are opportunities for businesses to transform, innovate and build resilience in the new economic environment. Knowing what is happening in the global economy now and in the long term will help companies to stay ahead of emerging risks and identify new business opportunities.
The global economy made a strong rebound in 2021 after a record recession in 2020. However, it has faced a new round of headwinds, as economies face ongoing supply chain disruptions caused by both COVID-19 and spillover impacts of the war in Ukraine. Russia’s invasion of Ukraine and economic sanctions on Russia will raise global energy, commodity and food prices, pushing up inflation higher, while China’s zero-COVID-19 policy continues to affect global supply chains.
The Asia Pacific economy led the COVID-19 recovery in 2021 and is expected to lead global economic growth in the coming years. By 2040, the region is forecast to account for 44% of global GDP, up from 34% in 2021. China alone will make up 22% of global GDP in the same year. Meeting demand from Asian consumers will thus be key to the growth of multinational companies in the years to come.
In 2022, 116 out of 210 countries are forecast to see inflation rates higher than 5%. The rising cost of living will negatively impact the purchasing power of households in 2022 and 2023. Energy and food prices are likely to see the highest increases. On top of the rising cost of living, interest rates are likely to rise, making debt servicing costs higher for households and businesses.
COVID-19 pandemic showed the need for diversification of international business supply chains. In 2022, businesses experienced another source of risk for interlinked supply chains: geopolitics. With Russia’s invasion of Ukraine and the sanctions imposed on Russia, many international corporations exited Russia. These developments will cause businesses to take geopolitical risks even more into account in the future.
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