The World Economic Forum’s Community of Chief Economists expects lower economic activity, higher inflation, lower real wages and greater food insecurity globally in 2022, pointing to the devastating human consequences of the fragmentation of the global economy.
According to the survey report “reversing previous expectations for recovery, the majority of respondents to the latest survey expect only a moderate economic outlook in the United States, China, Latin America, South Asia and Pacific, East Asia, sub-Saharan Africa and the Middle East and North Africa in 2022.
In Europe, the majority expect the economic outlook to be weak. The choices of both business and government are expected to lead to greater fragmentation in the global economy and unprecedented shifts in supply chains, creating a perfect storm of volatility and uncertainty. These patterns are expected to create further difficult trade-offs and choices for policy-makers, and – without greater coordination – shocking human costs.
These are the key findings of the World Economic Forum’s quarterly Chief Economists Outlook, published Monday.
“We are at the cusp of a vicious cycle that could impact societies for years. The pandemic and war in Ukraine have fragmented the global economy and created far-reaching consequences that risk wiping out the gains of the last 30 years. Leaders face difficult choices and trade-offs domestically when it comes to debt, inflation and investment. Yet business and government leaders must also recognise the absolute necessity of global cooperation to prevent economic misery and hunger for millions around the world. The World Economic Forum’s Annual Meeting this week will provide a starting point for such collaboration”, says Saadia Zahidi, Managing Director at the World Economic Forum.
The war in Ukraine, continued surges of COVID-19 variants and associated supply shocks are impacting expectations on inflation. The majority of chief economists surveyed by the Forum expect high or very high inflation in 2022 in all markets except China and East Asia – with 96% expecting high or very high inflation in the US, 92% for Europe and 86% for Latin America. In parallel, two-thirds of chief economists expect that average real wages will decline in the near term in advanced economies, while one-third are uncertain. Ninety percent of those surveyed expect average real wages to fall across low-income economies.
It further said “With wheat prices expected to increase by over 40% this year and prices for vegetable oils, cereals and meat at all-time highs, the war in Ukraine is exacerbating global hunger and a cost-of-living crisis. Over the next three years, chief economists expect food insecurity to be most severe in sub-Saharan Africa and in the Middle East and North Africa. At the current trajectory, the world is on track for the worst food crisis in recent history, compounded by the additional pressure of high energy prices. These expert predictions are echoed in the experience of the general public.