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2021 in Perspective and a Look Forward to 2022

by Surbhi Arora - 14 December, 2021, 12:00 384 Views 0 Comment

Ring out the old, ring in the new, Ring, happy bells, across the snow:

The year is going, let him go; Ring out the false, ring in the true.

Ring out the grief that saps the mind, For those that here we see no more;.. 

These words from ‘A Poem For Every Day Of The Year’ by Lord Alfred Tennyson brings about a truth that we all have witnessed in the last year. The grief that saps the mind is at times too much to bear. But as life moves on…this year also will end with some mixed feelings in all. We all welcomed 2021 as a new beginning when the Covid-19 vaccine was invented and it was thought that the pandemic was behind us. But alas! It was and is still around us – changing forever the way we lived.

For projecting what the future holds, one needs to look back at the lessons learned in the past. Let us now look at 2021 in perspective before we look forward to 2022.

Major events that shaped 2021 and its impact:

Firstly, Without a doubt, the most anticipated event of 2021 was the arrival of the COVID-19 vaccine in large enough numbers to help tide over of the pandemic.

Let us look at the following global numbers:

– Number of people fully vaccinated are 3.56 billion

– Number of people only partly vaccinated are 810.79 million

– 55.5% of the world population has received at least one dose of a COVID-19 vaccine.

– 8.35 billion doses have been administered globally, and 30.58 million are now administered each day.

– Only 7.1% of people in low-income countries have received at least one dose.[1]

If we look at India’s numbers:

  • total number of doses given till date is 131 crores
  • Number of fully vaccinated people are 49.8 crores
  • 1% of the Indian population is now fully vaccinated

Secondly, the labour market fallout from the COVID-19 pandemic shock still continues, with young and lower-skilled workers being particularly hard-hit. Pandemic related disruptions have caused the labour market recovery to significantly lag the output recovery in most countries. Also, there has been a major shift away from the past employment trends towards an increase in automation. Reduction in salaries, retrenchment and widespread unemployment have been the areas of concern in 2021. One needs to look into worker reallocation support measures to take care of the situation.

The gender gap continued to widen through 2021. Women, having precarious jobs, were hit hard by covid-19 lockdowns. The pandemic cost women around the world at least $800 billion in lost income in 2020, according to Oxfam. [2]

Thirdly, the global economic recovery is continuing, even as the pandemic resurges. There have been lasting imprints on medium-term performance. The global economy was projected to grow by 5.9 percent in 2021 and 4.9 percent in 2022. This decrease is attributed partly due to supply disruptions and worsening pandemic dynamics. The spread of new variants has increased uncertainty about how quickly the pandemic can be overcome. Policy choices have become more difficult, with limited room to manoeuvre.[3]

World Economic Outlook Growth Projections[4]:

[1] https://ourworldindata.org/covid-vaccinations?country=OWID_WRL assessed on 10th Dec. 2021

[2] https://www.economist.com/the-world-ahead/2021/11/08/the-number-of-people-in-extreme-poverty-is-falling-again assessed on 10th Dec. 2021

[3] World Economic Outlook – Recovery During a Pandemic-Health Concerns, Supply Disruptions, and Price Pressures, Oct. 2021 by IMF.

[4] https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021 assessed on 10th Dec. 2021

We can see that the worst seems to be over economically as 2021 saw an increase in world output. Projections for 2022 may be more or less at the same levels as 2021 as there is still uncertainty around.

Fourthly, due to the global recession, inflation rose above 5% in US and 3% in UK. In India, inflation has seen some peaks too in 2021 as shown in the following chart:

Due to Covid-19, the government had pump up the financial markets and as a result, central banks ploughed huge amounts of money into the financial system. Covid-19 interrupted the production of various goods and services. Prices of coal, gas and oil have increased.

Fifthly, the pandemic pushed many people in middle-income countries back into poverty. In 2020 and 2021, economists warned of a “re-Asianisation” of poverty as millions of Indians, in particular, faced fresh hardship. But, as the recovery takes hold, poverty will once again become concentrated in the poorest parts of sub-Saharan Africa and fragile states. By 2030, over 60% of those living on less than $1.90 per day will be in fragile states. Stable countries, meanwhile, are inching towards ending extreme poverty.[5] Another area of concern is that it is predicted that one in ten people who are poor will be in urban areas.

Across the world, governments have introduced social protection measures, including cash transfer programmes targeting the poor. Debt repayments were also suspended.

According to IMF, economic growth in 2022 will pick up faster in some rich countries than in poor ones. PWC analysis[6] expects that the global economy will revert to its pre-pandemic level of output. On one hand, there is the Chinese economy, which is already bigger compared to its pre-pandemic size and on the other hand are advanced economies which are either service-based like, UK, France and Spain or more focused on exporting capital goods like, Germany and Japan and are unlikely to recover to their pre-crisis levels by the end of this year.

These economies are growing but lower levels of output are projected which will push up the unemployment rates. Thus, the governments should focus gradually from fighting the COVID-19 virus to dealing with higher unemployment rates by upskilling their workforce and creating jobs in newly emerging labour-intensive sectors.

Morgan Stanley economists say price surges will subside, making way for 4.7% global GDP growth in 2022.[7]

[5] https://www.economist.com/the-world-ahead/2021/11/08/the-number-of-people-in-extreme-poverty-is-falling-again assessed on 10th Dec. 2021.

[6] https://www.pwc.com/gx/en/research-insights/economy/global-economy-watch/predictions-2021.html assessed on 10th Dec. 2021

[7] https://www.morganstanley.com/ideas/global-macro-economy-outlook-2022 assessed on 10th Dec. 2021.

Morgan Stanley Real GDP Forecasts (Year/Year)

Source: Bloomberg, Haver Analytics, IMF, Morgan Stanley Research forecasts.

Note: Aggregates are PPP-weighted. Brazil consensus number taken from BCB market expectations survey. China consensus reflects a subset of peers.

According to the press release by The Conference Board, by the end of 2022, 66 out of 77 key economies, representing 96% of global GDP, should be at or above pre-pandemic output levels, though labour market and income recovery will lag somewhat.[8]

No one had expected that at the end of 2021, we will still be talking about social distancing, mask wearing and organizing virtual gatherings. The future is uncertain but there is hope that we will see a better 2022. Our list of to-do’s might look a bit different than that of the past years but let us all ring in the new with new hopes for a wonderful new year.

[8] https://www.conference-board.org/topics/global-economic-outlook/press/global-economic-outlook-2022 assessed on 10th Dec. 2021.

Surbhi Arora
Author is Masters in Economics and Corporate Law. She has over twenty-eight years of rich experience in Finance, Project Management, Company Secretarial work, Editorial, Skill Development and Academics. Being a passionate writer, she has authored a few books and numerous research papers.
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