The headwinds to global economic growth — such as those from the pandemic, supply chain imbalances and labor shortages -- will start to dissipate next year, allowing the economy to enter a stable growth phase by 2023, said Moody’s recently.
The credit rating agency expects G-20 economies to grow 4.4% collectively in 2022 and then by 3.2% in 2023, driven by strong household spending, inventory restocking and increased capital spending.
The current mismatch between supply and demand as well as persistent labour market shortages should improve over coming quarters, allowing supply-side inflation pressures to moderate, Moody’s noted.
"Monetary and credit conditions will tighten as central banks look to remove pandemic-era liquidity and interest rate support and adopt a neutral stance," said Madhavi Bokil, a Senior Vice President at Moody's and the author of the report. "If the tightening is gradual and well communicated — thus, avoiding financial market surprises — we do not expect it to derail growth.”
A key assumption underpinning Moody's forecast of global economic growth is that as the threat from the pandemic recedes, schools and workplaces will remain open, more workers will return to the labour force, demand for services will recover, and travel and migration will increase, the firm said.
The forecasts also assume that supply logjams will clear in due course, Moody’s added.
Nonetheless, the pandemic remains a source of high forecast uncertainty, the firm pointed out.
Another risk to the recovery is the potential for more persistent supply chain disruptions and a ratcheting up of inflation, without wages keeping up, that would lead to an erosion of household purchasing power, Moody’s said.
The pandemic has also accelerated geopolitical realignment, with geopolitical tensions persisting between China, the US, as well as the US' partners on various issues, according to the firm.
Cyber risks are likely to become more of a challenge for governments and rated entities going forward, the firm predicted.