BUMPY RECOVERY
The world strived for a quick recovery in 2021 but staggered instead.
On the one hand, the world saw a revival in economic growth, trade and investment, and consumer demand. The International Monetary Fund (IMF) projected the global economy would grow by 5.9 percent in 2021, following a contraction of 3.1 percent in 2020.
Global foreign direct investment flows in the first half of 2021 showed stronger-than-expected rebound momentum, and global trade is expected to reach a record high this year, the United Nations Conference on Trade and Development (UNCTAD) said.
On the other hand, the global economic recovery has been hindered by more complicated and enduring obstacles.
Almost two years into the pandemic, people have been living with shifting COVID-19 rules, from mask mandates and tests to lockdowns and travel bans.
The strained global supply chain has also taken its toll on the recovery. Global trade was choked after the Suez Canal in Egypt was blocked by a huge container ship. The global chip shortage was prolonged following a blaze that ripped through the main plant of a major Japanese chip manufacturer in March. Rarely seen winter storms in Texas almost froze the global petrochemical sector.
Furthermore, inflation has been soaring worldwide. In November, year-on-year inflation in the eurozone and the United States reached a 25-year and a 39-year high respectively. The soaring prices of natural gas and other energy sources, combined with port congestion, further aggravated inflation.
The development divide has impeded sustainable growth. The IMF warned of a dangerous divergence in economic recovery, saying there is a widening gap between advanced economies and many developing economies.
Carmen Reinhart, senior vice president and chief economist of the World Bank Group, said per capita GDP in about 88 percent of low-income countries is lower than pre-COVID levels.
"We've had a rebound, but we've yet to see anything resembling a truly global recovery," she said.
NEW RISKS
The global economy is widely expected to continue its recovery from the pandemic next year despite the emergence of new headwinds.
The IMF, in its October World Economic Outlook, has kept its global growth projection at 4.9 percent for 2022. However, the IMF's Managing Director Kristalina Georgieva said earlier this month that the organization is likely to pare back its expectations because "a new variant that may spread very rapidly can dent confidence."
Liang Guoyong, a senior economist with UNCTAD, said the world is likely to see a weak economic recovery complete with high risks. Besides the impact of the pandemic, developed economies such as the United States are expected to tighten their monetary policies, which could cause an adverse financial spillover to countries across the world, particularly those with less economic resilience.
On Dec. 15, the U.S. Federal Reserve said it would taper off its bond purchases faster and end the pandemic-era stimulus program in March. The central bank's Summary of Economic Projections showed that the majority of the Fed members expected three interest rate hikes next year.
The Fed's recent move has evoked memories of what is commonly called the "taper tantrum" announcement of 2013, when then Fed Chairman Ben S. Bernanke hinted at quicker-than-expected tightening of U.S. monetary policy. The taper then disrupted the global markets, with emerging economies witnessing huge capital outflows and a corresponding rise in inflation.
According to data from the Institute of International Finance, in late November, non-resident capital flows to emerging markets excluding China turned negative for the first time since the coronavirus-induced market turbulence in March 2020. "We've seen the willingness of investors to engage with emerging markets dry up," said Robin Brooks, chief economist at the institute.
As the Federal Reserve accelerates its tapering, economies like Brazil, Russia, Poland and Mexico have raised interest rates, whether to tackle inflation or prevent currency depreciation and capital flight.
The Fed rate hikes may lead to drastic changes in the global financial landscape, putting more pressure on emerging economies, warned Tobias Adrian, financial counsellor and director of IMF's Monetary and Capital Markets Department, while stressing more debt structuring may arise in the future.
CHINA'S SHARE
China's stability continues to bring a boost of confidence to the global economy.
One characteristic of China's economy is its solid growth, which is expected to remain above 8 percent, according to the IMF.
Although logistics bottlenecks confront global trade, the trips of as well as the freight volume on China-Europe freight trains in the first 10 months of 2021 have both exceeded those of the same period in 2020.
Another characteristic is a commitment to further opening-up. China in 2021 successfully held a number of international fairs, including the China International Fair for Trade in Services and the China International Import Expo. The country is the world's second largest import market and has been for 12 consecutive years.
Apart from stability and opening-up, China continues to pursue its own path of high-quality economic development. Liang noted that China has successfully coordinated efforts to stem the spread of COVID-19 with stable production and steady exports, providing much-need support for the recovery of the global economy.