News & Insights

The world economy continues to face strong headwinds. Markets remain hopeful that central banks will soon pause the tightening campaign and give economic activity a breather, although the stubborn persistence of inflation could dampen those hopes.

Global economic growth is faltering markedly and indicators point to an extended period of subdued growth. Although easing bottleneck pressures points to a material drop in inflation during the second half of 2022, will this be enough to calm central banks?

World GDP likely shrunk in Q2 2022 – for the first time since the 2020 pandemic related decrease – owing to economic downturns in China, Russia and the US. Is bad news truly good news?

The current challenge for central banks is to restore low and stable inflation, while preserving financial stability and averting a recession. A task that looks less likely now than a few months ago.

Investors still hope the Goldilocks scenario of moderating inflation and supply-led growth will emerge in H2 2022, although the recent trends in bottlenecks and the labour market call for caution.

The global growth backdrop continues to weaken, yet the mix of elevated inflation and tightening labour market is generating urgency for central banks to normalise stances.

The global economy is facing three interrelated shocks. New Covid-19 cases are once again gaining momentum in Europe and Asia – especially in China – worsening supply chain disruptions. In addition, the war in Ukraine will hinder global growth through many different channels. Lastly, central banks are under significant pressure to quickly normalise policy stances.

In reaction to the invasion of Ukraine late last week, instead of military intervention, numerous sanctions were taken in order to isolate Russia from the rest of the world, with the goal of weakening it economically.

The precipitous turn for the worse in the geopolitical situation and its consequences on the financial markets calls for a careful analysis.