World Economic Outlook Update, January 2022: Rising Caseloads, A Disrupted Recovery, and Higher Inflation
World Economic Outlook, January 2022
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- Published: January 25, 2022
Global growth outlook
- Global growth is expected to moderate from 5.9 in 2021 to 4.4 percent in 2022—half a percentage point lower for 2022 than in the October World Economic Outlook (WEO).
- Growth revisions in the two largest economies:
- United States: downward 1.2 percentage-points revision, reflecting a revised assumption removing the Build Back Better fiscal policy package from the baseline, earlier withdrawal of monetary accommodation, and continued supply shortages.
- China: 0.8 percentage-point downgrade, reflecting pandemic-induced disruptions related to the zero-tolerance COVID-19 policy and protracted financial stress among property developers.
- Global growth is expected to slow to 3.8 percent in 2023.
- This 2023 forecast is 0.2 percentage point higher than in the previous forecast, with the upgrade largely reflecting a mechanical pickup after current drags on growth dissipate in the second half of 2022.
- Forecast conditionality:
- The forecast is conditional on adverse health outcomes declining to low levels in most countries by end-2022, assuming vaccination rates improve worldwide and therapies become more effective.
Inflation and supply-side developments
- Elevated inflation is expected to persist for longer than envisioned in the October WEO, with ongoing supply chain disruptions and high energy prices continuing in 2022.
- Assuming inflation expectations stay well anchored, inflation should gradually decrease as supply-demand imbalances wane in 2022 and monetary policy in major economies responds.
- Noted drivers of higher and more broad-based inflation include rising energy prices and supply disruptions, notably in the United States and many emerging market and developing economies.
Risks to the outlook
- Risks to the global baseline are tilted to the downside.
- Specific downside risks highlighted:
- Emergence of new COVID-19 variants could prolong the pandemic and induce renewed economic disruptions.
- Continued supply chain disruptions, energy price volatility, and localized wage pressures increasing uncertainty around inflation and policy paths.
- As advanced economies lift policy rates, risks to financial stability and emerging market and developing economies’ capital flows, currencies, and fiscal positions may emerge—especially with debt levels having increased significantly in the past two years.
- Geopolitical tensions remaining high.
- Ongoing climate emergency raising the probability of major natural disasters.
Policy priorities and recommendations
- Health strategy:
- Emphasis on an effective global health strategy, with worldwide access to vaccines, tests, and treatments essential to reduce the risk of further dangerous COVID-19 variants.
- Requires increased production of supplies, better in-country delivery systems, and fairer international distribution.
- Monetary and fiscal policy:
- Monetary policy in many countries will need to continue on a tightening path to curb inflation pressures.
- Fiscal policy—operating with more limited space than earlier in the pandemic—should prioritize health and social spending while focusing support on the worst affected.
- International cooperation:
- Essential to preserve access to liquidity and expedite orderly debt restructurings where needed.
- Climate policy:
- Investing in climate policies remains imperative to reduce the risk of catastrophic climate change.
World Economic Outlook Update, January 2022: Rising Caseloads, A Disrupted Recovery, and Higher Inflation
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- WEO Update January 2022
- Full Report