In our previous article published at the end of November, we projected 2022 would be the year of normalisation, with the gradual return of the world economy to reality.
Our view was that after a sharp slump in 2020 and an overshoot in 2021, economic growth in developed markets would begin to slow down in 2022, while growth in emerging markets, excluding China, would recover. The reopening of many emerging-market countries after massive vaccination campaigns would be the key to economic revival.
But in just the past month, the macroeconomic backdrop has shifted massively, with two new factors that make predictions more difficult. They are the rapid spread of the Omicron coronavirus variant, and rising inflation risk that is causing the US Federal Reserve to speed up the tapering of its stimulus measures and start raising interest rates.
Because Omicron has been…
