Macroeconomic conditions

After taking a significant hit in 2020 due to the coronavirus pandemic, the global economy rallied sharply in 2021. However, the pandemic is not yet over, as demonstrated in the fourth quarter by a sharp resurgence in cases and the emergence of new variants of the virus. Local restrictions on movements that were reimposed in many countries toward the end of 2021 as a result of these developments prevented a stronger recovery of the global economy. Moreover, significant disruptions to supply chains over the course of the year took their toll on manufacturing.

The recovery was more pronounced than in the previous year, although the pace varied between regions and between sectors depending on the particular course of the pandemic, access to vaccines, and the extent of economic and fiscal stimulus measures. According to the International Monetary Fund (IMF), the economies of developed countries grew by 5.0 percent over the course of 2021. The eurozone exceeded this figure, with growth of 5.2 percent, but remained below its pre-crisis level from 2019. The US economy, meanwhile, supported by extensive government stimulus packages, expanded at a rate of 5.6 percent, which was slightly above the global average. The US economy had experienced a minor contraction in the previous year. Following a decline of just 2.0 percent in 2020, the emerging markets and developing countries saw their economic output rise by 6.5 percent. China exceeded this rate of growth with an increase of 8.1 percent, which was driven by strong exports and rising domestic demand.

The IMF reported that global economic output grew by 5.9 percent in 2021, which more than made up for the decline of 3.1 percent in the previous year. It also stated that global trade was up by 9.3 percent after suffering a steep decline in 2020 (down by 8.2 percent).

However, the continuation of this global economic upturn was subject to a resurgence of risk at the end of the year. This was due not only to the spread of the highly contagious Delta and later Omicron variants of coronavirus but also to the restricted access to vaccines in low-income countries, which led to regional variances in economic growth. In addition, disruption to the manufacturing and supply situation as a result of the pandemic increased significantly over the course of the year and led to bottlenecks of key production goods. These supply shortages were associated with a sharp increase in commodity prices and energy costs, which led to higher consumer prices. Despite the growing danger posed by inflation, monetary and fiscal policy remained on an expansionary footing. Toward the end of the year, however, it became clear that the first interest-rate hikes in this cycle were on the horizon in the US.

Gross domestic product in 2021 real year-on-year change

Source: International Monetary Fund (as at Jan. 26, 2022)