Economic forecasts: what to watch out for in 2022?
Jim O’Neill, a former chairman of Goldman Sachs Asset Management and a former UK treasury minister goes into some open questions on issues that will be relevant for the economy in 2022. From Covid-19 evolution to productivity gains or public debt levels. Most of these issues have in common the high level of uncertainty that they pose in any economic forecast.
According to Jim Neill, economic forecasting has become even more hazardous than usual as there are many uncertainties regarding several issues other than COVID-19. Please find below a summary of the main open questions described in his article:
- Inflation: Are this year’s price increases transient, or do they represent something more ominous? According to the author central bankers are also not clear how long inflation will last.
- What is the purpose of monetary policy in today’s economy? Should we still worry about government debt levels? Government debt becomes problematic at some precise level? According to the author the relevant issue is what the debt is for, therefore debt incurred to prevent a collapse in economic activity is quite different from debt incurred simply to fund an overly ambitious government’s agenda.
- Do pandemic-driven behavioral changes and innovations herald the long-awaited return of robust productivity gains? Productivity growth has been disappointing across most advanced economies for many years. Policymakers want to boost productivity and the author hopes they are more serious now than they have been in the past.
- How will financial markets evolve? The author does not answer this question, although he warns that if any of the several developments to watch take a negative turn, the implications for financial markets could be dire.
- Uncertainty about global governance: Unlike in the 2008-10 period, when the G20 proved so effective, there has been almost no meaningful progress on global economic cooperation in 2020-21. The author hopes that 2022 brings a vast improvement on this front.
- Another major threats and non-conventional macro issues relevant to any economic forecast are as follows: new covid waves after the Omicrom variant, the silent pandemic of antimicrobial resistance, the risks associated with climate change, energy prices hike or global poverty.