The world economy in the new year… the specter of Corona

At a time when world landmarks are changing, and global and regional powers are battling for control and power in the new world, economic indicators interact in parallel to form one of the most important fields of war or strategic competition. Indicators are now more important in determining the strength and immunity of states and their ability to protect themselves and achieve the interests of their people.

The new year 2022 raises fundamental questions about future scenarios for the global economy, more than two years after it was exposed to the storm of the “Covid-19” pandemic, which burdened the economies of all countries of the world, and put them in front of many difficulties that were added to their previous difficulties.

In light of these repercussions of the pandemic, and the different responses to it according to different countries and the evolution of their different systems and capabilities, different mutants of the coronavirus have appeared, and have led to a slowdown in the recovery movement in recent months, and it is still casting a shadow over the beginnings of the new year, despite the emergence of opposite positive indicators represented in In the encouraging result of the experiments on the “Covid 19” drug being conducted by some companies such as the American company “Pfizer”. With these overlapping influences, the year 2021 concludes with an uncertain long-term outlook, as countries accelerate the vaccination movement of their citizens, in pursuit of societal immunity.

Many challenges and opportunities

The expectations of the International Monetary Fund indicate the direction of the global economy to achieve a growth rate of 4.9 percent during 2022, compared to a growth rate estimated by the Fund at 5.9 percent in 2021. Although this slowing rate compared to the previous year appears normal as a result of the recovery of the global economy part of the His recovery during the past year, the chances of recovery remain uncertain with the breeding of mutants and the intensification of the infection rate, especially with the persistence of high rates of inflation in many major economies, and the strong opposition faced by the proposals to raise interest rates in the European Union countries.

In parallel with high inflation, the ability of major economies to grow may remain threatened, which is likely to push the central banks of these countries to raise interest rates. They are not encouraging indicators for global growth, which may fall below the expectations of the IMF, and towards recession.

Unprecedented global debt

In the United States of America, the inflation rate has risen to exceed unprecedented levels in the country for three decades. As well as at the world level, these percentages rise in parallel with the increase in unemployment rates and the sharp rise in global debt, reaching the highest level of increase since World War II, and approaching about 226 trillion dollars, due to the consequences of the virus. This high level of debt put countries in a difficult situation, especially since the matter was accompanied by an increase in private debt ratios also to record levels, and the breeding of new mutants of the virus and its effects.

Global debt has increased by 28 percentage points, to 256% of GDP, in 2020, according to the latest update of the International Monetary Fund’s Global Debt Database. Borrowing by governments represented just over half of the increase, as the proportion of global public debt jumped to a record high of 99% of GDP. Private debt from non-financial corporations and households has also reached new highs.

During the first two years of the pandemic, governments were forced to inject their markets with liquidity to face the consequences of the pandemic, and thus gave a good reason for the occurrence of inflation, especially with the parallelism of this factor with two other factors, namely the impact of supply chains as a result of successive closures to prevent the spread of infection and reduce the number of infected, and governments implement support policies To protect the groups most affected by the crisis, and to limit the catastrophic effects of the faltering of incomes of individuals, institutions and families as a result of the closure.

In parallel to all this, there are economic experts who see positive growth rates expected during 2022, because despite the expected decline from 2021, they remain ahead of the contraction witnessed in 2020, and it is better than expectations witnessed in the same year, when It was not known what horizon the pandemic would take, and what repercussions it would bear.

These optimists believe that the new year predicts many positive surprises that may arise from two main sources, the first of which is the acceleration of the pace of vaccination at the global level, and thus the reduction of pressures caused by the pandemic on global economies, and secondly, government policies thirsting for solutions with which economies restore some of their health, Which could create a harmonious dynamic of one global trend towards growth, just as the harmony caused by the discovery of vaccines and the start of vaccination processes.

In developed countries, vaccination rates have reached 60 percent, while less developed countries still suffer from problems in increasing these rates, and in convincing large segments of their citizens to receive doses, which leads to large differences between these two types of countries in protecting their societies from The health and economic damages of the virus.

constant worry

On the other hand, also linked to the developments of the global economy in the new year, the rise in energy prices represents a more prominent challenge this year, as it witnessed a remarkable escalation in its pace during the year 2021, which caused a significant increase in the prices of goods and services that increased the costs of their producers.

It is also noted that the majority of economic forecasts and analyzes of a forward-looking nature for the coming year are still closely related to the pandemic, especially with the succession of new variables, and concern about their nature and effects, the speed of their spread and the possibility of being more deadly, which still casts a shadow on the prospects for the international economy in The new year. On the other hand, reassuring indications are looming about the latest variant, “Omicron”.

The Economist does not expect the US and global economy to return to normal in 2022, at a time when many problems still dominate the global economic situation, preventing it from recovering from the effects of the global pandemic that swept the world more than two years ago. In a report, the magazine points to the big problem that the United States and the world are currently suffering from, which is high rates of inflation, with economists suspicious that this inflation will be temporary, as well as the problem of disruption of supply chains in the world, and the increase in demand for goods in exchange for shortage in requesting services. Regarding inflation, the magazine said that throughout 2021, economists said that inflation will be temporary, that supply chain problems will gradually subside as governments and economies absorb the interactions of the pandemic, and that the labor market will recover again with the return of workers in rich countries to their work, and that energy prices It will come back to normal and decline, but by the end of 2021 the picture looks different, for central banks and governments as for people who follow these indicators with great concern.

The problems of global trade in 2021 were caused not only by supply disruptions, such as the closure of Vietnamese factories due to the pandemic, but also because there was an increase in demand in the United States and the world, and finally there was no shortage of goods, compared to the unusually high demand for them . For the global economy to return to normal, consumers need to spend more of their big money on services, such as going to restaurants and traveling, which is hard to do right now.

And while economies are short of the workers needed to thrive in service industries, there are no signs of workers returning from vacations they took during the pandemic. Expectations remain that inflation will remain elevated in the early months of 2022, even as interest rates increase. It may take a year and a half for the rate hike to have its full effect on the economy, according to central bankers.

Although citizens in the first world countries have received emergency government assistance to confront the pandemic and its effects, they are still unable to bear the costs of inflation, which in some countries has reached 6 percent, as is the case in the United States, which is the highest percentage in decades.

While the revolution is in the United States as well, China, on the other side of the world, is also suffering from the continuation of the real estate crisis in it, which has slowed its growth pace and negatively affected the global economy in which it has played a growing role for at least three decades.

Corona continues

The pandemic continues to shadow the global economy in 2022 as well. It is no longer as strong as it was in the previous two years, especially when the vaccine had not yet been discovered, and at the next stage when doubts about its efficacy were still high. But today it continues, and it kills thousands on a daily basis around the world, while it continues to spread rapidly in its new version, “Omicron”, as is the case in France, for example, in which the Minister of Health announced, at the end of the year, that the number of injuries may soon reach one hundred thousand. Daily.

Today, the global economy is facing many possibilities in this regard. Either the pandemic will begin to recede with time, especially since it is known that mutated viruses have eroded their strength with the emergence of new mutant, but the danger remains due to the nature of these mutagens that are able to penetrate the immune systems that recognize the first mutations, And the inability to identify the new mutant, especially that the vaccines are compatible with the mutant is still a source of doubt and concern among scientists, before it is with the public.

On the economic level, the economic impact of “Covid 19” will remain heavy on the economies of the world until the day when the effects of the disease caused by the infection can be controlled, as closures, aid and infusion of government funds will remain necessary measures as long as the virus continues to kill lives. Economic stimulus funds cannot continue as a permanent mechanism in dealing with the pandemic, because its effectiveness is linked to being an exceptional emergency mechanism, yet it has led to historical inflation rates.

Therefore, after the positive data brought about by the availability of the vaccine, the major questions that are being asked today revolve around the possibility of finding a permanent treatment for the virus and its disease on the one hand, and the possibility of finding effective economic solutions over a time commensurate with the continuation of the pandemic without a permanent and sufficient treatment for Covid patients. Under abnormal conditions that affect human health and existence, it would be appropriate for the economy to operate in an unconventional way to absorb the effects.