Despite the lapse driven by the Delta variant’s introduction in 2021, the global economy was yet on
the path to increase by 5.1 per cent in 2021, and 2022 will almost certainly be another year of
above-potential recovery growth. In the forthcoming decade, the direct impediments to the global
economy will be a continued trend toward deglobalisation and more than anticipated inflation.
Global growth will be challenged and aided by the decarbonisation of economies in response to
climate change. The lessons learned about resilience in the face of disruption learned during the
epidemic will become increasingly essential in the decade ahead.
The world economy is on track to achieve its most powerful post-recession rebound in 80 years in
2022, two years and a half after the COVID-19 pandemic began. Nonetheless, the resurgence is
projected to differ across countries, with big economies predicted to grow strongly while many
developing economies crawl.
In 2022, global growth is predicted to rise to 4.2 per cent, led by significant economies such as the
United States and China. While GDP forecasts for practically every part of the world have been
raised for 2022, many people are still dealing with COVID-19 and what is likely to be a lengthy
shadow cast by it. Despite a rebound in 2021, global GDP is expected to be 4.9 per cent below pre-
pandemic estimates in 2022. Per capita GDP in multiple arising markets and developing countries is
projected to stay below the pre-COVID-19 high for a significant time. The pandemic will shape the
route of global economic activity as it worsens.
According to the latest Global Survey, in contrast to the first three quarters of 2021, executives’
uncertainty over COVID-19 is no longer a top economic issue. When asked about threats to their
countries’ economies, executives are now more likely than the epidemic itself to identify rising
effects on the supply chain as the most common risk to firm growth and inflation. The pandemic,
which has been the most-identified danger to domestic GDP since March 2020, is now cited by only
one-quarter of respondents, down from half of those who did so in September 2021.
The recovery of global economic activity in the first half of 2021 boosted merchandise trade above
pre-pandemic levels, prompting experts to raise their trade projections for 2021 and 2022. Global
merchandise trade volume is expected to grow by 10.8 per cent in 2021, up from 8.0 per cent estimated in
March, followed by a 4.7 per cent increase in 2022. (Table 1). As merchandise trade returns to its
pre-pandemic long-run trend, growth should slow. Supply-side challenges like semiconductor
scarcity and port backlogs can burden supply chains and impede trade in specific locations.
Nonetheless, they are unlikely to have a significant impact on global aggregates. The epidemic itself
poses the most serious dangers.
Lasting Legacies
External demand and increased commodity prices will propel emerging economies and developing
countries to a 6% growth rate this year. Many countries’ recovery is being hampered by COVID-19
resurgences, unequal vaccination, and the partial withdrawal of government economic support
measures. Growth is predicted to be mild at 4.4 per cent if China is removed. Longer-term, the
pandemic’s long-term implications – a loss of skills due to lost jobs and schooling; a sharp drop in
investment; higher debt burdens; and more significant financial vulnerabilities – are projected to
harm the emerging market and developing countries’ prospects. Development in this set of
economies is expected to drop to 4.7 per cent in 2022 as governments slowly remove policy
assistance.

Growth has been reduced to 2.9 per cent in low-income economies, where immunisation has lagged.
Except for last year’s downfall, this would be the most sluggish growth in the last two decades. In
2022, the group’s output is expected to be 4.9 per cent lower than pre-pandemic estimates. The
pandemic has wreaked havoc on fragile and conflict-affected low-income nations, setting back per
capita income growth by at least a decade.
Due to China’s resurgence, the most vital regional recovery is predicted to be in East Asia and the
Pacific. Recovery in South Asia has been impeded by fresh outbreaks of the virus in India and Nepal.
Growth in the Middle East and North Africa, Latin America, and the Caribbean are insufficient to
compensate for the decrease in 2020. While aided by global spillovers, the rebound in Sub-Saharan
Africa is anticipated to be modest, given the slow rate of immunisation and delays in major
infrastructure and extractive industry investments.
Uncertain Outlook
According to the June estimate, advanced economies will achieve comprehensive immunisation of
their populations by the end of the year, thereby containing the epidemic. New cases are expected
to drop dramatically in major emerging markets and developing nations. Nevertheless, there is a lot
of uncertainty about the future. A longer-lasting pandemic, a wave of corporate bankruptcies,
financial stress, or even societal upheaval may disrupt the rebuilding process. Simultaneously,
tremendous success in eradicating COVID-19 and more significant spillovers from advanced
economic growth could result in more robust global growth.
Despite this, the pandemic has resulted in considerable development lapses. Although per capita
income growth in emerging markets and developing economies is expected to be 4.9 per cent this
year, it is expected to be practically flat in low-income countries. In nearly two-thirds of emerging
market and developing economies, including three-quarters of unstable and conflict-affected low-
income countries, per capita income lost in 2020 will not be entirely recovered by 2022. About 100
million people are expected to return to severe poverty by the end of the year. The most vulnerable
populations – women, children, and unskilled and informal workers – have been hit the hardest by
these negative consequences.
Global inflation, which has risen in tandem with the economic recovery, is predicted to continue to
climb during the rest of the year. Still, it is expected to remain within most countries’ goal ranges.
Suppose inflation rises over goal in emerging markets and developing countries. In that case, this
trend may not justify a monetary policy reaction if it is only temporary and inflation expectations
remain well-anchored.
Climbing Food Costs
Increasing food prices and accelerated aggregate inflation may worsen food insecurity in low-income
countries. Policymakers should avoid utilising subsidies or price restrictions to alleviate the pain of
rising food costs by ensuring that rising inflation rates do not lead to a de-anchoring of inflation
expectations. These dangers add to the country’s already high debt levels, putting even more
upward pressure on global agricultural prices.
Following the recession last year, a resurgence in global commerce provides a chance for emerging
markets and developing nations to boost economic growth. Emerging market and developing
nations have half the trade costs of established economies, and decreasing them might enhance
trade and drive investment and growth.

Policy actions will be necessary with relief from the pandemic, which is tantalisingly close in many
places but far away in others. Ending the pandemic will require ensuring equal vaccination
distribution. Many low-income countries will benefit significantly from comprehensive debt
reduction. Policymakers will need to use fiscal and monetary tools to help the economy recover
while keeping watchful financial stability. To support growth on a green, resilient, and inclusive path,
policies should focus on reinvigorating human capital, expanding access to digital connections, and
investing in green infrastructure.
Ending the epidemic through broad immunisation and prudent macroeconomic stewardship to avoid
crises will require global coordination.