MACRO CHAPTER
“WE COULD SEE THAT FOR ALL THE BENEFITS OF STIMULUS PROGRAMMES AND THE REBOUND FROM UNLOCKING US, THE WORLD ECONOMY SIMPLY RUNS OUT OF STEAM.”
SAVVAS SAVOURI
CHIEF ECONOMIST, PARTNER, TOSCAFUND ASSET MANAGEMENT
I
have no doubt that 2022 will be looked back on as a year of momentous reorientation. I write here of China’s economy being recognised as the world’s only economic growth engine but its currency becoming accepted as a real reserve currency. This can only of course come about because the US economy and the dollar have been demoted. And whilst the 2021 year-end rally in the greenback might suggest momentum into 2022, I would caution otherwise. This said, I see the likes of Egypt and Brazil et al devaluing against the dollar. So much for my central scenario. There are risk worm holes we could explore. Take exogenous shocks that occur abruptly. We
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could for instance suffer a virulent Covid-22, with lockdowns all over again, this time with nothing like the fiscal or monetary response for Covid-19. There is also – as always – the potential for some adverse geopolitical shock. From nearby, say Russia, or far afield, say North Korea with the South, China with Taiwan. Within the EU’s borders there is the threat that Hungary or Poland try to unwind the EU Project, or the UK and EU go at it in a trade war to their joint cost. There are also endogenous risk worm holes. We could for instance see that for all the benefits of stimulus programmes and the rebound from unlocking us, the world economy simply runs out of steam –
China too. Matters here could be made worse by economies facing rising interest rates being unable to cope with such shocks, resulting in stagflation. All this said, I have full confidence that China will end 2022 strongly and so too will all those economies and currencies that link closely to it, the UK included.
HEDGE WEEK GLOBAL OUTLOOK REPORT I JANUARY 2022
