Just when the world thought the pandemic was waning, a new complication in the Ukraine sends shockwaves throughout the globe.

In the midst of the Ukraine-Russia-NATO hostilities, risk assessments for 2022 by economists are being revised.

According to one credit insurance firm’s risk barometer for the Asia Pacific region, supply chain disruptions and inflation (among many other unknown repercussions of war) will haunt the rest of the year.

While the time of return to normality was difficult to predict based on the coronavirus pandemic, the latest fulminating war in Europe has dashed any hope of gradual easing in H1 2022, with disruptions and material shortages likely to continue or worsen in sectors such as oil.

Furthermore, despite signs of slow recovery this year, the number of insolvencies (still very low for the moment in most countries, including the United States, France and Germany) should gradually rise in 2022, as it is already the case in the United Kingdom, according to Coface economists.

As of last week, the firm had lowered its 2022 GDP growth forecasts for several European countries, as well as for the USA and China.

Inflation a key concern

Barring any backfiring effects of NATO sanctions and other efforts to end the hostilities, the Gulf region is expected to post strong growth performance in 2022.

Norway recorded its highest ever trade surplus in 2021 thanks to buoyant oil and gas exports. Finally, many African countries, even those affected by armed conflicts or political upheavals, have still benefited from high prices for energy, minerals, timber and agricultural products. Also:

  • In the United States, inflation and supply-side issues dampened the recovery momentum. While GDP growth is expected to remain solid in 2022 (+3.7%), these factors will continue to weigh on activity. In Q4 2021, the annual inflation rate reached 7.0%, its highest level in 40 years. In response to this price surge, the US Federal Reserve has become more aggressive and has hinted at an imminent rate hike, triggering monetary tightening in some emerging countries.
  • In Europe, disruptions in supply chains, combined with strong demand, led to higher producer and energy prices. Germany has experienced the highest inflation in over 30 years. The situation is somewhat mixed in the rest of the euro area: inflation remains relatively moderate in France, while prices have soared in Spain.
  • In the United Kingdom, inflation had risen to 5.4% and had led the Bank of England to become the first major central bank to raise its interest rate in December 2021, before doing so a second time in early February 2022.
  • Sharp inflation risks are expected to exacerbate social pressures in emerging and developing countries, which had already been reinforced by the increase in inequality associated with the pandemic. In Africa, high energy and food prices, which weigh heavily on households, have limited consumption to the extent that food insecurity and poverty have increased. Fiscal support, already very limited on the continent due to public debt levels, has been withdrawn and unemployment is high in most countries. South Africa, Algeria, Angola, Mozambique, Nigeria, DRC, Zimbabwe, Ethiopia, Guinea and Tunisia are examples of countries experiencing increasing social pressures as a result of the crisis.

China going against the grain

In Q4 2021, China’s slowdown had deepened, with an annual growth rate of 4.0%, the slowest pace since the peak of the pandemic in 2020. The country’s economic recovery has been affected by the slowdown in the property market; the continuation of the ‘zero-COVID’ strategy; energy shortages and weak household spending and investment growth.

In Q3 APAC was heavily affected by the Delta variant but had rebounded by the end of the year. Similar, Pacific economies rebounded at the end of the year, in line with the easing of restrictions. Most of the region’s economies had returned to their pre-crisis GDP levels by the end of 2021, with the notable exceptions of Japan and Thailand. However, the continued recovery could add to inflationary pressures, especially if labor markets tighten.

Meanwhile, the show must go on: economies can leverage digital transformation and stepped-up cybersecurity to buffer against war+pandemic complications and also imminent surges of Russian-linked cyber threats and e-fraud.