Are stagflation and recession on the horizon for G7 economies?
Inflation forecasts for G7 countries and the Euro area skyrocketed over the past month, which, coupled with an expected higher interest rate environment, the ongoing pandemic, China locking down to contain fresh waves of Covid-19, and conflict in Ukraine, is weighing heavily on GDP growth. Although stagflation—elevated inflation in a low-growth environment—and a recession are not in the cards at the moment, the global GDP outlook has continued to darken in recent weeks.
Looking ahead, the global economy will continue to grapple with lingering supply chain disruptions in the near term, while commodity prices are projected to remain elevated, leading to longer and more pronounced inflationary pressures this year relative to 2021. Moreover, as central banks tighten interest rates dramatically this year, with further Covid-19 related shutdowns and a worsening of the war in Ukraine still possibilities, the global economic outlook may continue to deteriorate as we enter the second quarter of 2022.
- Insights from Our Analyst Network
Commenting on the latest supply chain issues, Andrew Hencic, senior economist at TD Economics, noted:
“Timelines around a sustained improvement in supply chains have been pushed back yet again amid the war in Ukraine and Covid-19 surge in China—to what extent, only time will tell. What is clearer to us is that so much will depend on how the demand side of the equation evolves in the coming months. If we’re right in our forecast, U.S. goods demand is poised to cool significantly in H2 2022 and into 2023, helping to ease supply chains leaving them less vulnerable to supply-side hiccups.”
Commenting on the global economic outlook with regard to the war and the pandemic, analysts at HSBC noted:
“To say that the global economic outlook is exceptionally uncertain is undisputable. Global growth will clearly be weaker than it would have been and inflation will be higher, potentially significantly so. Already the swings in commodity prices and financial markets have been dramatic and volatility appears set to be a feature of the outlook for the foreseeable future. Economic forecasts could be in a state of persistently playing catch-up as world leaders take decisions that affect the macroeconomic outlook. The challenges facing the major central banks grow ever harder.”
Try our portal now
Quickly and easily compare the latest forecasts for G7 economies across key macroeconomic indicators with FocusAnalytics
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinion of FocusEconomics S.L.U. Views, forecasts or estimates are as of the date of the publication and are subject to change without notice. This report may provide addresses of, or contain hyperlinks to, other internet websites. FocusEconomics S.L.U. takes no responsibility for the contents of third party internet websites.
Author: Steven Burke, Economist
Date: April 1, 2022
TagsEconomic Growth (GDP) Portugal France Unemployment rate Resource Curse Colombia Inflation Economic Debt Latin America Africa oil prices Economists Political Risk Forex Healthcare UK Sub-Saharan Africa economic growth TPS Draghi Israel Palladium Exchange Rates Argentina MENA Cannabis Economic Outlook Sterlin Precious Metals Commodities CIS Countries Budget deficit Ukraine IMF Base Metals Commodities Euro Mexico interview USA GDP Spain Asia Greece Interest rate Japan Economic Crisis Vietnam India Oil TPI Asean Germany Central America digitalcurrencies Copper Russia Australia Venezuela Eurozone Company News Euro Area Banking Sector Trade Nordic Economies ECB Brazil Dolar Eastern Europe Fed Energy Commodities election scotiabank Commodities Exports public debt Italy Consensus Forecast centralbanks TPP Exchange Rate South Africa Costa Rica; GDP; Budget European Union Canadian Economy Housing Market United Kingdom Qatar Bitcoin Government Bond chile Tunisia United States Lagarde Base Metals OPEC Nigeria G7 Infographic WorldCup Major Economies precious metals Agricultural Commodities Gold Investment Iran Turkey USD Brexit Emerging Markets Cryptocurrency Canada Asian Financial Crisis China
In our latest webinar, our economists examine the outlook for Latin America's economy this year. Spoiler alert: Eco… https://t.co/wCXk7AY32n
42 minutes ago
The U.S. energy sector has gone from strength to strength in recent years. In our latest insight piece, we look at… https://t.co/6HiQ9SGEDR
1 day ago
In this new insight piece, we examine the likely trajectory of Brazil’s economy under new president Lula da Silva:… https://t.co/4uAVrQPByz
4 days ago
East and South Asia's economy will record the fastest growth of any world region this year and next, although prosp… https://t.co/j26qMHz4E3
4 days ago
This year, inflation in most Sub-Saharan African economies should ease from last year’s peak. It will, however, rem… https://t.co/sWswa9iAV2
5 days ago