[Economics] The global economy would face risks of stagnation in 2022

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Most economies, including the eurozone, the UK, Japan and China, have not fully recovered from the ongoing pandemic and their fragile private demand leaves them vulnerable to growth setbacks.

The biggest risk facing the global economy to fines in 2022 could be stagnation, not stagflation, as cost-driven price pressures hurt still weak domestic demand and tighter fiscal and monetary policies set in at a slower pace. ballast, according to Nomura Holdings Inc.

In most countries, there is a “prevalence of a bad type of inflation that puts pressure on profit margins, erodes real household income, and tends to self-correct when demand is weak,” wrote Nomura economists led by Rob Subbaraman. in a 2022 outlook report released Dec. 10.

 

Most economies, including the eurozone, the United Kingdom, Japan and China, have not fully recovered from the ongoing pandemic and their fragile private demand leaves them vulnerable to growth setbacks, the economists wrote.

 

A slowdown in growth could come from an erosion in earnings and household incomes due to higher inflation, higher savings amid economic uncertainties and a change in fiscal policy that will be a major drag, according to the report.

 

The US economy will remain quirky, the economists wrote, as the country has rebounded to strong demand and thus has a larger cushion to absorb cost-pressing inflation.

 

As monetary and fiscal policies tighten, the US is better positioned to set tailored conditions in 2022 around inflation targeting and trend growth, according to Nomura.

Should the US experience runaway inflation in the first half of 2022, which is not Nomura's baseline scenario, the Federal Reserve could implement steep rate hikes. If this scenario materializes, "this further strengthens our view that the biggest risk to the world economy in 2022 fines is secular stagnation, not stagflation," they wrote.

 

Link: https://www.latercera.com/pulso/noticia/la-economia-global-enfrentaria-riesgos-de-estancamiento-en-2022/E2WNMDVURFBCZDDS6INUCDFIHI/