Going into 2022, many pundits were expecting a good economic year, as inflation started to show its characteristics at the beginning of the year, and at that time the interest of senior central bank officials around the world , especially the US Federal Reserve, was overshadowed amid expectations that the economic recovery in Europe would be stronger than in the US, and growth in the Chinese economy will be strong.
Now, as 2022 comes to a close, many of those expectations have failed, as the global economy appears to be exhausted by the major blows inflicted over the course of 12 months.
The two fatal blows that have been dealt to him – so to speak – and which have caused severe pain and a slowdown in activity, have mainly come from the Russo-Ukrainian war that broke out last February and from the high inflation from which everyone suffers.
Amidst investor anxiety, characteristics of the economic downturn, the global energy crisis, a strong dollar, fiscal tightening policies by central banks, declining living standards in many countries, especially in Europe, and a crack in the real estate market in China, the second largest around the world, the characteristics of the international economy have become turbulent and it has been dominated by distrust, especially with the International Monetary Fund (IMF) last October which reduced its forecasts for the growth of the global economy this year.
After a growth rate of 6% in 2021, the International Monetary Fund projects that the growth rate will not exceed 3.2% in 2022, following a significant slowdown in the world’s major economies, to be the weakest growth rate since 2001, except for the period of the acute global financial crisis and the phase of the Corona pandemic.
Al-Eqtisadiah gathered the views of a group of experts on the most important issues that have dominated the international economy this year.
Dr Dorothy Benjamin, a lecturer in international economics and a consultant to numerous international organizations, believes that rising prices and its clear repercussions on living standards are the most controversial issue globally in 2022.
He told Al-Eqtisadiah: “Although inflation rates have declined in the last period of the year, its effects and repercussions have been evident throughout the year and will extend into next year. It is likely that the rate of international inflation in 2022 will not reach less than 8.8 percent.” Inflation rates are noted to have reached levels unprecedented for decades in Europe, the UK and the US and this year to record highs in many developing countries.
And he adds: “To deal with this stressful situation on living standards, the major central banks have rushed to raise interest rates, but it should be noted that the US Federal Reserve, the European Central Bank and the Bank of England have The pace of interest rate hikes slowed in recent weeks and before the end of the year, with central bank policy makers expecting to keep interest levels high for a long time.
Economist Lujan Ethan links the difficult economic conditions experienced by many developing economies to this year’s slowdown in economic growth or deflation in many developed economies on the one hand, and central bank policies to raise interest rates in the context of the battle against inflation on the other hand.
And he assures Al-Eqtisadiah that tightening monetary policies through raising interest rates has led to a drop in output in the United States and Europe. As for China, the world’s second-largest economy, expectations are largely uncertain , as the country is facing an increase in cases of the Corona epidemic.
“Many developing countries are still lagging behind and facing additional economic risks due to policies adopted by advanced economies to deal with inflation, and the economic slowdown in major economies does not leave enough capital for poor countries,” he says.
While Robin Isaacs, a financial analyst at the Bank of England, believes one of the most worrying economic issues this year has been the decline in the market value of cryptocurrency assets.
He explains to Al-Eqtisadiah that “over the past year, the market value of cryptocurrency assets has plummeted from three trillion dollars to just about $850 billion, while Bitcoin, the most popular and widely used currency, has dropped from 68,000 to $17,700 and the FTX cryptocurrency exchange sank.” From $32 billion to bankruptcy in one week, these losses and market turmoil have exposed the volatility of cryptocurrencies and the urgent need for consumer protection.
Robin Isaac believes that cryptocurrencies may not recover their full value and that it is urgent to regulate the market through stringent measures to address financial instability and lack of consumer protection.
The question of digital currencies appears from the point of view of Dr. Max Theodore, Professor of Public Finance at the University of London, an issue of great economic weight on the global economy this year, and perhaps in the coming years, but from another corner.
He told Al-Eqtisadiah, “60 countries in the world have reached an advanced stage of central bank digital currency development, and as of last November, the United States has become one of them, and 18 countries in the Group of Twenty have digital currencies for the central bank under development or in the testing phase.” Or it was launched in its entirety, and the motivations globally for this are different, but in general, the indications of central banks regarding digital currency are governed by the idea of improving financial inclusion.
He adds: “The logistical difficulties in sending financial stimulus checks during the time of the Covid pandemic and the inefficiency of payment systems in many countries have convinced central banks that leveraging technology and relying on digital currencies can help develop faster and cheaper payment systems, and 2022 could go down in history as the year central banks put digital currencies into practice.
While Hunter Toby, professor of international economics at the University of Glasgow, believes that the semiconductor issue and related international conflict is a central issue in the global economy this year, and that this dossier has left an impact that has gone beyond global economic affairs for the geostrategic conflict between the United States and China.
And to Al-Eqtisadiah he comments: “Semiconductors are an essential part of daily life in our contemporary world, but the semiconductor market is known to be cyclical, with the supply sometimes increasing and other times decreasing. market from the beginning of this year due to increased demand for products that contain electronic chips, production disruptions caused by the Corona epidemic, as well as logistics and supply chain problems.
He adds: “Semiconductor shortages have weakened economic growth by about a quarter of a trillion dollars in 2021, which is why we have seen stiff competition this year in electronic chips, leading to fueling the technology war between the United States and China, and Washington has adopted a strategy that aims not only to improve US competitiveness and address supply chain fragility, but also to thwart China’s goal to produce advanced semiconductors and which the conflict has had a negative impact on the international economy this year.
For his part, John Hudson, an expert on the American economy, believes that the year 2022 has revealed much of the shortcomings in American technological capabilities and that, despite the billions allocated by the administration of President Joe Biden to fill the current gap in the sector of the semiconductor industry, it is unlikely to succeed and continue. Relying on Taiwan, there is no permanent reason for economic and political conflict between Washington and Beijing.
And he told Al-Eqtisadiah: “The administration of US President Joe Biden has announced through the Secretary of Commerce, Gina Raymond, that the dependence of the United States on advanced semiconductors produced in Taiwan is unsustainable and dangerous due to the threat to Taiwan from its neighbor China. As a result, he prioritized the White House for passage of the CHIPS and Science Act, which went into effect last August, and the law provides $52 billion in subsidies and tax incentives to promote the development of advanced semiconductor factories on American soil. and one of the projects benefiting from this funding will be implemented by Taiwan Semiconductor Manufacturing Company TSMC which currently produces over 90 percent of the world’s most advanced chips.
And he confirms that despite this, American projects will produce about 20,000 electronic chips each month, but this represents less than 1.6 percent of TSMC’s current monthly production, which produces 1.3 million semiconductor chips, and therefore dependence on Taiwan will remain.
