Upturn – Bottlenecks – Inflation | Global economy in Covid cycle 8/02/2022
at its 2021 level of 3.75 percent in 2022 as long as the pandemic does not result in any major disruptions. South Africa fared much better than expected throughout the pandemic in 2021 (up five percent) and is expected to grow at a more moderate rate of two percent this year. Nigeria is again set to grow by 2.5 percent this year.
Highly dynamic inflation rates Global inflation trends are under the predominant influence of the pandemic. While industrialised countries recorded an inflation rate of only 0.7 percent in 2020, it climbed to well over three percent in 2021. Momentum in inflation should ebb slightly in 2022 with IMF expecting inflation of just over 2.5 percent and the OECD expecting 4.2 percent for a similar group of countries (OECD 2021). Inflation in the emerging countries has not changed as much with inflation expected to stay high at close to six percent (IMF 2022). Inflation trends and monetary policy highly divergent In recent months, the pace of inflation has continued to pick up in Europe and in the United States, while remaining low in the major Asian countries. The central banks in the United States and in European countries have been caught by surprise by the force of this upturn, the continuing bottlenecks in various industries and several one-off factors, as have the markets that have had to constantly upwardly revise their forecasts. Inflation has reached levels not seen in more than 20 years and has consequently sparked public debate about the resulting risks, particularly in Germany. The major central banks have had to increasingly justify their expansionary monetary policy and gradually turn the lever back to a tighter course. In other countries, particularly in China and Japan, inflation has remained low due to the economic slowdown. Some industrialised and emerging countries have already responded to the temporary pressure by tightening up their monetary policy, including Australia and New Zealand, Brazil, Russia and South Korea, as well as some eastern European countries (Poland, Hungary, Czech Republic). The picture remains mixed. Inflation surges in United States and Euro area The increased upwind in prices in North America and Europe continues to be dominated by the yoyo effect of the upturn in the wake of the pandemic, the structural shift in demand from services to goods, several temporary factors on the energy markets (with a short-term impact on inflation) and extraordinary factors related to the pandemic such as the closure of ports, the blocking of the Suez Canal by a transverse container ship, and the logistic chaos in container shipping, particularly in California. The situation has been exacerbated by strong global demand, supported by expansionary monetary and financial policy, especially in the United States. The economic policy decisions of some countries also contributed to the overall momentum, such as the six-month reduction in the valueadded tax rate and the introduction of a national emissions trading scheme in Germany, as well as the expiry of individual labour market measures in the United States. Most one-off factors will subside in the coming year, with only the semi-conductor crisis likely to last until into 2023. Inflation in the United States addressed with monetary policy response In the United States, the trend in inflation over the last two years has sparked a major debate on monetary policy since the summer. Dominant in the debate is the question of whether the pressure on
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