Overview

• The global economic outlook remains clouded by various factors, including China’s policy response to fresh COVID-19 outbreaks (which has led to lockdowns in a range of major population centres), the Russia-Ukraine conflict (and its flow on effects on the supplies of various commodities, including energy) and the ongoing disruptions to supply chains (which could worsen if lockdowns in China persist).
• Financial and commodity markets were highly volatile in the first half of March, however markets appeared to have greater certainty in the second half, coinciding with policy rate rises by both the US Federal Reserve and Bank of England. This saw major advanced economy 10 year government bond yields rise above their pre-pandemic rates.
• Global business surveys suggest that economic activity held up comparatively strongly in March –however these measures are weighted more heavily towards advanced economies, where services have generally recovered from the impact of the Omicron wave earlier in the year. In contrast, Russia and China led the EM services measure lower.
• Our forecasts are unchanged this month –we expect that the global economy will grow by 3.7% in 2022 and then slow to a trend-like 3.5% in 2023. That said, we note the near term downside risk to our China forecast as a result of current (and any future) lockdowns. In addition, tail risks (such as a recession in a major advanced economy) down the track have risen given the combination of an energy price shock as well as monetary and fiscal policy tightening.

For further details, please see The Forward View – Global (April 2022)