Overview

• The Omicron variant of COVID-19 has spread rapidly –with case numbers in a broad range of countries vastly exceeding previous peaks. Although death rates are typically below those of previous waves, the sheer number of cases is straining many healthcare systems and disrupting economic activity – as infected workers are forced to isolate.
• Market expectations around monetary policy have shifted, with policy rates set to rise more rapidly than previously anticipated. This has seen equity markets weaken and bond yields rise. Inflationary pressures have persisted, due to a range of factors – including various COVID-19 outbreaks, a shift in spending from services to goods, prolonged supply shortages of labour, raw materials and key inputs and disruptions to global shipping.
• Growth prospects for early 2022 appear relatively weak for both advanced economies and emerging markets, largely related to the current COVID-19 wave. Despite restrictions on activity generally being less onerous than in earlier waves, high frequency data indicates there has been an impact on activity. Business surveys point to services being particularly impacted. Receding case numbers in coming months should allow for a bump in growth from Q2.
• COVID-19 remains the primary risk to the global outlook, including the potential for further waves. There is considerable uncertainty how long the disruptions to global supply chains will persist. Political tensions have also escalated in a number of regions, most notably border tensions between Ukraine and Russia.
• Overall, our forecast for global growth in 2022 is softer –down to 4.2% (from 4.4% previously). This was driven by a weaker outlook for China, along with downward revisions for the United States, Japan and United Kingdom, while our forecast for India is somewhat stronger. Our forecast for 2023 is unchanged at 3.6%.

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