The Biggest Economic Risks for 2022

Economists have struggled lately during the pandemic to estimate and analyze what might happen in the future. They seem optimistic about next year but could easily get disappointed again.

The Covid pandemic years are full of forecasts that unfortunately didn’t work out. Most forecasters commonly perceive a strong recovery with lowering prices and a transition from emergency monetary-policy settings. What could go wrong with these forecasts? Plenty of things.

There are many risks such as inflation, Omicron, China’s Evergrande crisis, a run-on emerging market, tough Brexit, euro crisis, increasing food prices in the Middle East, and more.

However, some things might even go better than anticipated, too. Governments might choose to keep fiscal support while China’s latest five-year plan could catalyze more substantial investment.

Omicron and stricter lockdowns

It seems to be early for a substantial verdict on the new Omicron variant. The new strain of the coronavirus appears to be more contagious, while it might verify to be less lethal. That might help the world get back to pre-pandemic normal life, meaning that people might start spending more money on services. 

For example, lockdowns and cautions kept people out of restaurants and gyms while encouraging them to buy more things for the home. After rebalancing of spending might increase the global gain to 5.2% from the forecast of 4.6%.

However, it is possible to get a disappointing outcome in case of a more contagious and deadly strain that would affect global economies.

The danger of inflation

At the beginning of 2021, based on the forecast, the U.S. had to end the year with 2.1% inflation. But, instead, it’s almost 6.9%. 

Omicron is considered just one possible reason for inflation. In the U.S., wages are rising rapidly, going even higher. Tensions between Ukraine and Russia might affect gas prices to surge.