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Strong but uneven growth

As the clock struck midnight on December 31, the promise of a new year lulled us into a hopeful January. If you ever wondered how the month of January got its name, you can thank Janus, the Roman deity of transitions, who is always portrayed with two faces, one looking into past and the other facing the future, suggesting an inevitable link between the two. Something that struck us as well when, to our dismay, we soon realized that 2022 sounded awfully similar to 2020 too. A cruel linguistic joke encroaching on our optimism or reasonable doubt?

Will 2022 mark the beginning of an end of the pandemic era or are we set to repeat the same scenarios? In their newly published Economic Outlook 2022 report, Allianz Research takes a look at the global economic trends and identifies the main developments for 2022.

Strong, but uneven growth

Global growth is set to remain strong, albeit uneven, pointing toward a rising divergence between advanced and emerging economies. Growth was mainly fueled by consumption, rising investments, and rebounding global trade.

As such, global output is expected to increase by +4.1 percent in 2022, with the Eurozone and the U.S. growing in line with the global economy at +4.1 and +3.9 percent, respectively. China’s growth of +5.2 percent in 2022 will constitute the lowest contribution to the global GDP growth since 2015, most likely causing negative spillover effects on emerging markets.

Vaccination rates, supply bottlenecks, and policy choices will be the factors potentially impeding growth.

Video summary of the Economic Outlook 2022, including commentary from Ludovic Subran, Allianz Chief Economist.
In this video, Allianz Chief Economist Ludovic Subran summarizes "Don't Look Up", Allianz's most recent economic and capital markets scenario.

Inflation (un)certainty

As supply chains remain disrupted, energy prices high, and labor market tight, the topic on everyone’s minds—inflation—will most likely stay high until mid-2022. However, inflation is likely to decelerate this year as the recovery becomes entrenched. 

Overall, the average annual inflation this year is expected to remain high at 4.4 percent in the U.S. and close to 3 percent in the Eurozone.

Amid continued uncertainty about the scale and duration of inflationary pressures, central banks are shifting towards a more hawkish monetary stance to prevent inflation from becoming embedded in expectations. 

Global trade above long-term average

Amplified by the omicron variant and disrupted by labor and supply chain bottlenecks, global trade will nonetheless continue expanding again above the long-term average and is expected to grow by +5.4 percent in 2022 and +4.0 percent in 2023

At a sector level, the 2021 outperformers should continue to see strong exports in 2022 (energy, electronics, machinery and equipment). The main export winner in 2023 should be the automotive industry. 

Policy withdrawal: haste makes waste

To ensure sustainable growth, a gradual withdrawal of monetary and fiscal policy support will be necessary. Regarding fiscal policy, fiscal consolidation in the U.S. will be stronger when compared to Europe. As already mentioned, monetary policy might be more hawkish due to current inflationary pressures in advanced economies. 

Greater divergence of fiscal and monetary policy normalization across countries could further increase imbalances and disrupt the recovery of international trade. As the gap between monetary and fiscal policy stances in Europe and the U.S. is bound to widen, there is a rising risk of decoupling, which could feed into capital market dislocations.

Tighter financial conditions or a premature withdrawal of policy support could additionally undermine the recovery and increase private and public sector vulnerabilities. Conversely, if inflationary pressures persist, central banks could fall behind the curve, with overshooting inflation causing potential adverse wage-price feedback effects that could hamper growth.

The known unknowns

Potential complications related to the omicron and other virus variants could further slow down the recovery and create additional global imbalances. As long as the vaccination rates remain below the threshold needed to secure herd immunity, potential new lockdowns could keep recovery uneven and incomplete.  

Political risks are also on the radar this year and with it, the risk of Covid-19 crisis (mis)handling, which is likely to take center stage in national polls. Key votes will be taking place in Portugal, Sweden, France and Hungary. The two largest global economies, China and the U.S. (midterm elections) will also be heading to the polls, as will Australia, Brazil, and India. 

In emerging markets, voters in the Philippines, Colombia, and Brazil will cast their votes. On the geo-political front, the U.S.-China relationship is likely to remain strained.

In addition to increasing the vaccination rates, the key policy priority should be aimed at calibrating the right level of support to the pace of the recovery, while gradually shifting toward more targeted measures focusing on growing firms and sectors. 

For an in-depth look at the numbers and regional outlooks, click here for the Economic Outlook 2022: Don’t Look Up! report by Allianz Research.

The Allianz Group is one of the world's leading insurers and asset managers with 126 million* private and corporate customers in more than 70 countries. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 767 billion euros on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage nearly 1.9 trillion euros of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance  industry in the Dow Jones Sustainability Index. In 2021, over 155,000 employees achieved total revenues of 148.5 billion euros and an operating profit of 13.4 billion euros for the group.

These assessments are, as always, subject to the disclaimer provided below.

*Including non-consolidated entities with Allianz customers.

Press contact

Lorenz Weimann
Allianz SE
As with all content published on this site, these statements are subject to our cautionary note regarding forward-looking statements:

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