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2021 Annual Report

Progress Arises from Change.

2021 Annual Report


Forecast of Macroeconomic Development

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The global economy is entering 2022 in a weaker position than most recently forecast by the International Monetary Fund (IMF). With the spread of the new Omicron variant of COVID-19, many countries have reimposed mobility restrictions. Rising energy prices and supply shortages have also resulted in higher and more broadbased inflation than anticipated, particularly in the USA and many emerging and developing economies. In its World Economic Outlook Update (WEO Update) of January 2022, the IMF lowered its growth forecast for the global economy by half a percentage point compared with October 2021 to 4.4% for 2022.

In Europe, according to the IMF, pandemic-related mobility restrictions and existing supply shortages are expected to drag on economic growth in 2022. For the eurozone, the IMF expects gross domestic product (GDP) to rise by 3.9% in 2022, with GDP for the German economy expected to grow by 3.8%. For the UK, it anticipates GDP growth of 4.7%.

For the USA, the IMF predicts a slowdown in GDP growth to 4.0% for 2022 as a result of lower effects from economic stimulus programs, an earlier withdrawal of monetary accommodation and continued supply shortages.

The IMF sees Japan’s economy benefiting in 2022 from improvements in external demand and continued fiscal support from the Japanese government, and forecasts GDP growth of 3.3% for the country in 2022.

For India, the IMF continues to forecast a high GDP growth rate of 9.0% in 2022. In other emerging and developing economies, the IMF expects growth to slow somewhat. In China, pandemic-induced disruptions to the economy related to its zero-tolerance COVID-19 containment policy and the ongoing crisis in its real estate sector lead the IMF to expect GDP growth of 4.8% there in 2022. For Brazil, the IMF anticipates GDP growth of just 0.3%, as multiple interest rate hikes by the Brazilian central bank to combat inflation will weigh on domestic demand.

The IMF forecast is conditioned on adverse health outcomes from the COVID-19 pandemic coming down to low levels in most countries by the end of 2022, assuming that global vaccination rates continue to improve and the pandemic becomes manageable. The IMF further expects that higher inflation will persist for longer than previously expected due to supply chain disruptions and higher energy prices. Inflation should gradually decrease, however, once supply and demand balance out again over the course of 2022.

The IMF also points toward a number of risks. For one, the emergence of new COVID-19 variants could prolong the pandemic and induce renewed economic disruptions. Furthermore, as advanced economies lift policy rates to combat inflation, risks to financial stability and emerging market and developing economies’ capital flows, currencies and fiscal positions – especially with debt levels having increased significantly in the past two years – may emerge.