Inflation, lack of inputs and climate risk slow global growth

From China to the United States, from Europe to Africa, the pandemic paralyzed the world’s economies almost simultaneously in March 2020. Two years and 5 million deaths later, the recovery is taking place in a scattered way.

Rich countries have benefited from privileged access to vaccines: the United States has already left behind the marks of its worst recession since the Great Depression of the 1930s, and the eurozone could do the same later this year. However, the rapid rise of a new epidemic wave and the discovery of a new variant light up the warning signal.

“Covid-19 will continue to be a threat,” warns ratings agency Moody’s in a statement.

And this threat is already materializing in regions with low vaccination rates, such as sub-Saharan Africa, where only 2.5% of the population was vaccinated in October and which, according to the IMF (International Monetary Fund), is doomed to an economic recovery slower.

By 2024, most emerging and developing countries are likely to fail to achieve growth forecasts made before the pandemic, according to the IMF.

Many central banks — such as those in Brazil, Russia and South Korea — have raised base interest rates to try to stave off runaway inflation, which could hamper the recovery.

Even in China, the engine of global growth, the recovery is slowing as risks mount, the IMF recently warned.

At the Asian powerhouse, consumption is struggling to return to pre-pandemic levels, there are fears for the difficulties of the developer Evergrande and electricity cuts are hampering business activity.

Inflation and scarcity

“The biggest surprise of 2021 was the increase in inflation,” write analysts at Goldman Sachs in their forecasts for 2022.

The rise in prices was driven by disorganized supply chains and the scarcity of essential products for international trade, such as semiconductors, a consequence of the explosion in demand during and after the crisis.

But also due to the dismay of many actors in world trade, such as stevedores in ports, truck drivers and supermarket cashiers who did not return to work after the confinement and caused a shortage of labor.

Inflation is also explained by the increase in the price of raw materials (wood, copper, steel) and energy (gasoline, gas, electricity).

The rise in prices, considered “temporary” by central banks, worries political leaders, including US President Joe Biden, who pointed out in November that it is “an absolute priority” to reverse the trend.

“The question is whether we really got out of the crisis,” Roel Beetsma, professor of economics at the University of Amsterdam, told AFP.

For now, the IMF continues to expect worldwide growth of 4.9% for next year.

The climate issue

The balance between economic growth and climate is increasingly far from being reached, as the conclusions of the COP26 showed.

The agreement reached at the conference calls on states to increase their commitments to reduce greenhouse gas emissions from 2022, but does not put the planet on the path to limiting warming to “well below” 2 °C, as it was established. in the Paris Agreement in 2015.

“Thinking short term is a common phenomenon, especially among politicians,” laments Roel Beetsma, who advocates a carbon tax that is uniform across all industries and has sufficient deterrent power, which is far from being the case in present.

Climate change and associated natural disasters could also affect the cost of food.

World prices are already close to the 2011 record, according to the Food and Agriculture Organization of the United Nations.

Wheat has risen almost 40% in one year, dairy products 15% and vegetable oils are breaking records.