World Economic Outlook Including Regional and Country Outlook

Economics and Country Risk
World Economic Outlook
World Economic Outlook

23 March 2022
Sara Johnson, Executive Director, Global Economics, sara.johnson@ihsmarkit.com, +1 781 301 9115
Confidential. © 2022 IHS Markit®. All rights reserved.

World Economic Outlook | March 2022
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Russia’s war against Ukraine reshapes geopolitical and economic outlooks
• While the outcome of the Russia-Ukraine war is highly uncertain, a lengthy political impasse is
likely. Economic damage to both countries will be substantial and long-lasting.
• Through sanctions and private investment decisions, Russia will be isolated from the global
economy for years to come. Ukraine must endure the massive displacement of people and
destruction of property.
• With energy prices surging and supply chain disruptions persisting, price inflation will remain high
through much of 2022. Global consumer price inflation is projected to pick up from 3.9% in 2021 to
a 17-year high of 6.4% in 2022 before subsiding to 3.4% in 2023.
• Major central banks are behind the curve in fighting inflation. In some major economies, labor
shortages are leading to an acceleration in wage rates.
• Global real GDP growth is projected to slow from 5.8% in 2021 to 3.3% in 2022 and 2023.
• Among regions, near-term economic growth will be led by Asia Pacific and the Middle East.
Relatively sluggish growth is projected in Europe and Latin America.

Global economic growth will slow in 2022 as Russia and Ukraine experience
severe recessions
Global real GDP, industrial production, and real Real GDP
exports of goods and services
Percent change 2020 2021 2022 2023
15
World -3.4 5.8 3.3 3.3
10 United States -3.4 5.7 3.3 2.8
Canada -5.2 4.6 3.3 3.1
Percent change
5 Eurozone -6.4 5.4 2.4 1.8

United Kingdom -9.4 7.5 2.8 1.2
0
Mainland China 2.2 8.1 5.1 5.2
-5 Japan -4.5 1.7 2.5 1.7
India* -6.8 8.8 6.4 5.9
-10 Brazil -4.2 5.0 0.1 2.5
1990 1996 2002 2008 2014 2020 2026
Russia -2.7 4.7 -11.1 -3.7
Real GDP Industrial production Real exports
Ukraine -4.0 3.3 -37.7 7.1
Note: * Fiscal years starting 1 April
Source: IHS Markit © 2022 IHS Markit

Purchasing Managers’ Index® data reflect regional variations in COVID-19

trends through February
JPMorgan Global Composite Output PMI® IHS Markit Composite PMI®
60 70
Index, over 50 signals expansion

60
50
50
40 40
30
30
20
20 10
2006 2008 2010 2012 2014 2016 2018 2020 2022 2017 2018 2019 2020 2021 2022
Manufacturing Service United States Eurozone Mainland China Japan
Source: IHS Markit, JPMorgan © 2022 IHS Markit Source: IHS Markit, Caixin, au Jibun Bank © 2022 IHS Markit

COVID-19 infection rates have declined from recent peaks but are turning up
in some countries
New daily cases of COVID-19 per 100,000 people, New daily cases of COVID-19 per 100,000 people,
seven-day moving average seven-day moving average
600 300
500 250
400 200
300 150
200 100
100 50
0 0
Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22
United Kingdom Germany France Italy Spain United States Mainland China Japan India Brazil Russia
Source: Our World in Data © 2022 IHS Markit Source: Our World in Data © 2022 IHS Markit

COVID-19 vaccination rates continue to rise
Total vaccine doses administered per 100 people, as of 14 March • The United Arab Emirates,
UAE
mainland China, Canada,
Italy and major European
Mainland China
Canada countries have the highest
France vaccination rates.
UK
Germany
Austria • The UN reports that 1.5
Spain billion doses per month are
Netherlands
Israel begin produced, but nearly 3
Japan
European Union billion people are waiting for
Brazil their first shot.
US
Czechia
Poland • Since March 2020, 500
India million people have been
Russia
infected with the COVID-19
0 50 100 150 200 250 300
virus and 6 million have died.
Source: One World Data © 2022 IHS Markit

Recovery timelines: Dates of sustained return to Q4 2019 level of real GDP
Q2 2020: Mainland China Q1 2022: United Arab Emirates

Q3 2020: Taiwan, Turkey Q2 2022: Japan, Philippines, Malaysia
Q1 2021: World, South Korea, Nigeria, Australia Q4 2022: Germany, United Kingdom, South
Africa, Thailand
Q2 2021: United States, Russia, Poland,
Sweden, Indonesia Q1 2023: Italy
Q3 2021: India, France, Netherlands, Q2 2023: Spain
Switzerland, Austria, Saudi Arabia
Q3 2023: Mexico
Q4 2021: Eurozone, Canada, Brazil
Q4 2023: Argentina

Real GDP growth will slow in all regions except MENA in 2022
Real GDP (annual % change) • Growth will slow in response

to high inflation, policy
8
restraint, and supply
6 constraints.
4
2
• The Middle East and North
Africa (MENA) will benefit
0
from rising energy exports.
-2
-4 • Asia Pacific (excluding
-6 Japan) will thrive thanks to
-8 strength in technology and
North Other Western Emerging Middle Sub- Japan Other Asia free-trade agreements.
America Americas Europe Europe East & Saharan Pacific
N. Africa Africa • Steep contractions in Ukraine
2020 2021 2022 2023 2024–28 and Russia will drag down
Source: IHS Markit © 2022 IHS Markit emerging Europe.

Asia Pacific will account for 53% of global real GDP growth from 2021 to 2031
Percent of world real GDP growth, 2021–31
Notable contributions:
Mainland China 32.7% Middle East & North Africa
United States 18.9% 4.7% Sub-Saharan Africa
India 7.8% 2.6%
North America
21.6%
Asia Pacific
53.4%
Other Americas
4.6%
Western Europe
10.2%
Emerging Europe
2.9%

Real GDP growth in key economies
Real GDP, advanced economies Real GDP, emerging markets

8 15
6
10
4
Percent change
Percent change
2 5
0
0
-2
-4 -5
-6
-10
-8
-10 -15
2000 2005 2010 2015 2020 2025 2000 2005 2010 2015 2020 2025
United States Eurozone United Kingdom Japan Mainland China India Brazil Russia
Source: IHS Markit © 2022 IHS Markit Source: IHS Markit © 2022 IHS Markit

Policy interest rates are on different paths
Major advanced economies Key emerging markets

6 35
5 30
Percent, end of quarter
Percent, end of quarter

4 25
3 20
2 15
1 10
0 5
-1 0
2005 2010 2015 2020 2025 2005 2010 2015 2020 2025
United States Eurozone Japan United Kingdom Brazil Russia India Mexico

Long-term government bond yields are rising in most countries
Ten-year bond yields, advanced countries Long-term bond yields, emerging markets
15 24
12 20
Percent, annual average
Percent, annual average

9 16
6 12
3 8
0 4
-3 0
1971 1981 1991 2001 2011 2021 2031 2001 2006 2011 2016 2021 2026 2031
United States Germany Japan United Kingdom Mexico India Brazil South Africa

Government budget deficits have narrowed since 2020 with the withdrawal of
COVID-19-related stimulus measures
Federal budget balance
6
0
Percent of GDP
-3
-6
-9
-12
-15
North America Other Americas Western Emerging Middle East & Sub-Saharan Japan Other Asia
Europe Europe North Africa Africa Pacific
2019 2020 2021 2022 2023 2024


Industrial materials prices remain volatile amid supply chain disruptions
IHS Markit Materials Price Index (MPI) • The Russia-Ukraine war is

6 exacerbating supply chain
IHS Markit weekly indexes, 2002:1=1
problems, sending industrial

5 materials prices to new highs.
• Supplies of natural gas, oil,
4
wheat, corn, sunflower oil,
fertilizer, lumber, neon gas,
3 aluminum, nickel, iron and
steel, titanium, and palladium
2 affected.
1 • As demand cools and supply

2007 2009 2011 2013 2015 2017 2019 2021 recovers, commodity prices
All materials Chemicals Nonferrous metals will retreat in the second half
of 2022 and 2023.

Expected losses in Russian production are temporarily driving up global

crude oil prices
Price of Dated Brent crude oil • The base forecast assumes
150 variable losses in Russian oil
exports of 1–3 million
125 barrels/day through 2023.
100 • Additional supply from Saudi
Dollars/barrel
Arabia, UAE, US, Canada,

75
Brazil, Norway, and Guyana
50
will shift the global oil market
from deficit to surplus.
25
• The Brent crude oil price per
0 barrel is projected to average
2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 USD118 in 2022, USD96 in
Current US dollars 2023, and USD87 in 2024.

Resurgent demand and disrupted supply have fueled price inflation
Global real GDP, producer prices, and consumer Consumer prices

prices
Percent change 2020 2021 2022 2023
15
World 2.2 3.9 6.4 3.4
United States 1.2 4.7 6.2 2.6
10
Canada 0.7 3.4 5.1 2.0
Percent change
Eurozone 0.3 2.6 6.9 2.8

5
United Kingdom 0.9 2.6 8.1 3.9
Mainland China 2.5 0.9 2.4 2.1
0
Japan 0.0 -0.2 2.1 1.7
India* 6.6 5.1 6.6 5.5
-5 Brazil 3.2 8.3 9.1 3.8
2001 2006 2011 2016 2021 2026
Russia 3.4 6.7 23.6 12.3
Real GDP Producer prices Consumer prices
Note: * Fiscal years starting 1 April

Global consumer price inflation will rise to a 27-year high of 6.4% in 2022
Consumer price inflation • Supply shortages and rising

10 prices of grain, energy, and
other industrial materials are
8 fueling downstream price
increases.
Percent change
6
• Currency depreciation is
exacerbating inflationary
4
pressures in some emerging
markets, forcing central
2 banks to raise interest rates.
0 • Consumer price inflation is

2001 2006 2011 2016 2021 2026 projected to reach 20–30% in
World Advanced countries Emerging markets Russia and Ukraine in 2022.

Consumer price inflation varies widely across regions
• The Russia-Ukraine war is Consumer price inflation

aggravating supply shortages 25
and inflationary pressures.
20
Annual percent change

• The sharpest accelerations in
15
prices will occur in Europe,
where energy prices are 10
surging.
5
• Monetary policy tightening
will contribute to disinflation 0
by restraining demand
-5
growth. North Other Western Emerging Middle Sub- Japan Other
America Americas Europe Europe East & N. Saharan Asia
• Tight labor markets in many Africa Africa Pacific
advanced countries will drive 2020 2021 2022 2023 2023–27
up wage rates. Source: IHS Markit © 2022 IHS Markit

The US dollar’s real exchange rate is rising
Real trade-weighted US dollar exchange rate index • The dollar’s real exchange
1.5 rate is supported by bond
yield spreads and solid US
1.4 economic growth.
Index, 2012 = 1.0
1.3 • The dollar could also benefit

from a flight to safety amid
1.2
uncertainties related to the
1.1
Russia-Ukraine war.
• In the mid-2020s, narrowing
1.0
bond yield spreads and the
0.9 eurozone’s current-account
1976 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026 2031 surplus will support moderate
euro appreciation.

Exchange rates per US dollar
Canadian dollar Euro

1.6 1.2
1.2 0.9
0.8 0.6
0.4 0.3
0.0 0.0
2000 2005 2010 2015 2020 2025 2000 2005 2010 2015 2020 2025
Japanese yen Chinese yuan

150 9
120
6
90
60
3
30
0 0
2000 2005 2010 2015 2020 2025 2000 2005 2010 2015 2020 2025
Note: Quarterly averages

Emerging-market currencies on different paths: Russia’s rouble plunged

after sanctions were imposed in response to the invasion of Ukraine
Weekly exchange rate indexes Current-account and fiscal balances
140 Percent of GDP, 2021
US dollar/local currency, 2016:1=100
120 Turkey
100 Brazil
80 Poland
India
60
Mexico
40
Indonesia
20
China
0
2016 2017 2018 2019 2020 2021 2022 South Africa
Mainland China India Brazil -8 -6 -4 -2 0 2 4
Russia South Africa Argentina
Turkey Current-account balance Fiscal balance

United States: Economic growth will slow but remain above trend in 2022
• The fallout of the Russia-Ukraine war is a reduction in projected 2022 real GDP growth from 3.7%
to 3.3%. The markdown is driven by sharply higher food and energy prices, a tightening of
financial conditions in light of elevated risks, and weaker growth in export markets.
• Higher inflation and lower stock prices will lead to slower growth in real household incomes and
spending. Improving COVID-19 trends should bring a shift in spending from goods to services.
• An unemployment rate under 4.0% will keep upward pressure on wage rates.
• Consumer price inflation is projected to heat up from 4.7% in 2021 to 6.2% in 2022 before
moderating as commodity prices retreat.
• After an initial rate increase in mid-March, the US Federal Reserve (Fed) is assumed to raise the
federal funds rate to terminal range of 2.50–2.75% in the next few years.
• Real GDP is projected to increase 5.7% in 2021, 3.3% in 2022, and 2.8% in 2023 and 2024.

US economic growth by sector: A broadly based rebound in 2021
Real GDP and its components

Percent change 2019 2020 2021 2022 2023 2024
Real GDP 2.3 -3.4 5.7 3.3 2.8 2.8
Household consumption 2.2 -3.8 7.9 3.0 2.4 3.3
Residential investment -0.9 6.8 9.1 -1.3 -3.2 -0.9
Business fixed investment 4.3 -5.3 7.4 6.2 3.9 3.5
Federal government 3.8 5.0 0.6 -2.0 -0.3 0.5
State and local government 1.3 0.9 0.4 1.3 1.9 1.2
Exports -0.1 -13.6 4.6 7.3 5.4 4.5
Imports 1.2 -8.9 14.0 7.4 0.6 3.4

Consumer spending is driving this US business cycle; services hit hard by

the COVID-19 pandemic are recovering
Real GDP and consumer spending Real consumer spending
10 20
8 15
Percent change
Percent change
10
4
5
2
0
0
-5
-2
-4 -10
1990 2000 2010 2020 2030 2000 2005 2010 2015 2020 2025
Durable goods Nondurable goods Services

Real GDP Real consumer spending

US interest rates will rise; business investment growth is led by equipment

and intellectual property
Interest rates Real business fixed investment
10 30
9
20
Year-on-year % change
8
7 10
6
Percent
5 0
4
-10
3
2
-20
1
0 -30
2000 2005 2010 2015 2020 2025 2030 2000 2005 2010 2015 2020 2025 2030
Federal funds Treasury, 10-year Equipment Structures Intellectual property
Mortgage, 30-year BAA corporate

Despite the withdrawal of pandemic-related stimulus, US federal budget

deficits and debt remain large
US federal budget balance US federal debt held by the public
1,000 4 120
Billions of dollars, fiscal years
0 0 100
Percent of GDP
80
-1,000 -4
60
-2,000 -8
40
-3,000 -12
20
-4,000 -16 0
1980 1990 2000 2010 2020 2030 1980 1990 2000 2010 2020 2030
Unified budget balance (left scale)
Balance as percent of GDP (right scale)

Canada’s economic expansion will proceed at a moderating pace
• Real GDP increased at an annual rate of 6.7% quarter on quarter (q/q) in the fourth quarter of
2021, led by strength in nonresidential fixed investment and inventory accumulation.
• Growth likely slowed to a 2.7% annual rate in the first quarter, restrained by the spread of the
Omicron variant of COVID-19 and resulting containment measures in January.
• Prospects for exports and capital spending remain strong. Trade with Russia and Ukraine
represents just 0.3% of Canada’s total merchandise trade. Higher commodity prices will generate
additional revenues from exports of oil, wheat, and metals.
• Consumer price inflation picked up to 5.5% year on year (y/y) in February, led by rising gasoline,
food, and shelter prices.
• The Bank of Canada raised its policy rate from 0.25% currently to 0.50% in early March; further
increases will take it to a neutral rate of 2.25% by the fourth quarter of 2023.
• Real GDP growth is projected to slow from 4.6% in 2021 to 3.3% in 2022, 3.1% in 2023, and 2.7%
in 2024.

Canada’s outlook summary
Real GDP growth (%) Consumer price inflation (%)

6 6
3
4
0
2
-3
-6 0
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025
Exchange rate per US dollar* Current-account balance**

1.4 50
25
1.3
0
1.2 -25
-50
1.1 -75
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025
*Annual average, **Billions of US dollars

Canada’s economic growth by sector

Percent change 2019 2020 2021 2022 2023 2024
Real GDP 1.9 -5.2 4.6 3.3 3.1 2.7
Personal consumption 1.4 -6.2 5.2 4.9 3.1 2.8
Residential investment -0.2 4.3 15.4 -3.9 1.5 0.7
Business fixed investment 2.5 -12.1 2.3 5.9 3.6 3.5
Government consumption 1.7 0.0 4.9 -0.6 1.0 1.7
Exports 2.3 -9.7 1.4 5.5 6.8 3.8
Imports 0.4 -10.8 7.4 4.7 5.4 2.6

Mexico’s economic recovery on a slow track
• Mexico experienced a mild recession in the final two quarters of 2021. Growth is gradually
resuming now that the latest wave of COVID-19 infections has subsided.
• Semiconductor shortages are limiting production of automobiles, electronics, and appliances. Yet,
manufacturing output is growing in response to strong demand from the United States—the
destination for 80% of Mexico’s exports.
• Consumer price inflation picked up to 7.3% y/y in February, as prices of transportation and
housing prices accelerated.
• With inflation exceeding its target range of 2–4%, the central bank raised its policy rate from 5.5%
to 6.0% on 10 February. IHS Markit analysts expect the policy rate to peak at 7.0% in late 2022.
• After an 8.4% decline in 2020 and a 5.0% rebound in 2021, real GDP projected to increase just
0.9% in 2022 and 2.5% in 2023, reflecting weak domestic demand.
• The outlook is darkened by high operational and security risks. Recent regulatory actions by the
government have favored state-owned companies, discouraging private investment.

Mexico’s outlook summary

6 8
3
0 6
-3
4
-6
-9 2
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

23 30
21
0
19
-30
17
15 -60
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

Mexico’s economic growth by sector

Percent change 2019 2020 2021 2022 2023 2024
Real GDP -0.2 -8.4 5.0 0.9 2.5 3.0
Private consumption 0.4 -10.7 7.3 0.7 3.0 3.7
Fixed investment -4.7 -17.9 10.2 -2.2 3.9 4.1
Government consumption -1.8 0.1 1.0 -0.3 1.2 1.7
Exports 1.5 -7.2 6.1 4.0 2.8 2.7
Imports -0.7 -14.2 14.5 2.0 4.4 3.9

Latin America’s economic recovery will slow as investment stalls
Real GDP • The Russia-Ukraine conflict

15 will exacerbate a highly
inflationary environment.
10
• Higher inflation and fiscal
5 deficits will lead to policy

tightening, slowing growth.
0
• Leftward policy shifts are
-5 hurting investment climates
across the region. Brazil and
-10
Colombia will hold national
-15 elections in 2022.
Brazil Mexico Argentina Colombia Chile Peru
• Regional real GDP growth
2020 2021 2022 2023 2024–28 will likely slow from 6.6% in
Source: IHS Markit © 2022 IHS Markit 2021 to just 1.4% in 2022.

Brazil’s economy restrained by high inflation and rising interest rates
• Real GDP increased 0.5% q/q in the fourth quarter of 2021 as fixed investment rebounded from
two quarters of decline and private consumption continued its expansion.
• Brazil’s economy is expected to stall in 2022. High inflation will undermine consumer purchasing
power, while high interest rates and political uncertainty will discourage investment.
• In response to 10.5% y/y consumer price inflation and exchange rate pressures, the Central Bank
of Brazil raised its policy rate by 100 basis points to 11.75% in mid-March. The bank also signaled
a similar increase at its next meeting in early May.
• Brazil will hold a national election in October 2022. Former president Luiz Inácio Lula da Silva is
leading in the polls. Brazil’s fiscal deficit will likely exceed 6% of GDP through 2024.
• Real GDP growth is projected to slow from 5.0% in 2021 to just 0.1% in 2022 as fixed investment
declines. Once inflation subsides and interest rates retreat, economic growth will strengthen to
2.5% in 2023 and 2.2% in 2024.

Brazil’s outlook summary

6 10
3 8
6
0
4
-3 2
-6 0
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

6 25
5 0
4 -25
3 -50
2 -75
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

Brazil’s economic growth by sector

Percent change 2019 2020 2021 2022 2023 2024
Real GDP 1.2 -4.2 5.0 0.1 2.5 2.2
Fixed investment 4.0 -0.5 17.3 -4.0 0.6 0.0
Government consumption -0.5 -4.5 2.0 2.9 2.6 2.2
Exports -2.5 -2.2 6.3 5.7 2.9 2.9
Imports 1.4 -10.2 12.9 7.3 3.0 3.3

The Russia-Ukraine war and resulting supply disruptions will drive up

inflation and dampen economic growth in Western Europe
• The war’s adverse effects will be felt through multiple channels, including high energy prices,
potential supply disruptions, trade linkages, financial stress, and wavering confidence.
• IHS Markit analysts now expect a mild contraction in the region’s real GDP in the second quarter
of 2022. Growth should resume in the third quarter as improving COVID-19 trends boost services
activity.
• Eurozone consumer prices rose a record 5.8% y/y in February, led by a 31.7% surge in energy
prices. Inflation is projected to average 6.9% in 2022 and 2.8% in 2023.
• In response to high inflation, the European Central Bank is likely to start raising the Deposit
Facility Rate in December 2022 and the benchmark policy rate in March 2023. The policy rate will
then rise to a long-term level of 2.0% by the end of 2024.
• Western Europe’s real GDP will likely slow from 5.6% in 2021 to 2.5% in 2022 and 1.7% in 2023.
• Rising debt burdens threaten to weigh on long-term growth prospects in many countries, along
with challenging demographics and poor productivity performance.

Eurozone surveys show continued strength in manufacturing and recovering

services activity in February
Eurozone consumer and business sentiment IHS Markit Eurozone PMI® data
20 70

Net positive replies, % of total
10 60
0
50
-10
40
-20
30
-30
-40 20
-50 10
2006 2008 2010 2012 2014 2016 2018 2020 2022 2006 2008 2010 2012 2014 2016 2018 2020 2022
Consumers Industrial sector Services sector Manufacturing Services
Source: European Commission © 2022 IHS Markit Source: IHS Markit © 2022 IHS Markit

Real GDP growth in major Western European economies
Real GDP • The 2022 eurozone real GDP

8 growth forecast is cut by 1.3
percentage points as a result
of the Russia-Ukraine war.
• Reflecting trade linkages,

0
Finland, Belgium, Greece,
Sweden, and Germany are
-4
among the hardest hit.
-8 • High debt burdens and a
slow tourism recovery are
-12 challenges
Germany United France Italy Spain Eurozone
Kingdom • UK growth will be slowed by
2020 2021 2022 2023 2024–28 interest rate hikes, energy
Source: IHS Markit © 2022 IHS Markit inflation, and tax increases.

Real GDP growth in other Western European countries
Real GDP • Pandemic-related losses in

8 travel and tourism continue to
6
affect Cyprus, Greece, Spain,
Portugal, Austria, and Italy.
4
• Norway is benefiting from
2
rising oil and natural gas
0
production and prices.
-2
• Consumer spending will be
-4 supported by excess savings
-6 accumulated during past
-8 lockdowns.
Netherlands Switzerland Sweden Belgium Norway Austria
• Recent gains in capital goods
2020 2021 2022 2023 2024–28 production and loan demand
Source: IHS Markit © 2022 IHS Markit are positive for investment.

Consumer price inflation is surging across Western Europe
Consumer price index

10
8
-2
Germany United Kingdom France Italy Spain Greece
2020 2021 2022 2023 2024–28

The UK’s economic growth is slowed by supply constraints and high inflation
• Supply chain bottlenecks, labor and transportation fuel shortages, high inflation, and the Omicron
variant have restrained economic growth in early 2022.
• After surging in December, new COVID-19 cases decreased in early 2022 but have turned up
again in March. Activity restrictions have been lifted, giving a boost to hospitality sectors.
• Consumer price inflation reached a 30-year high of 5.5% y/y in January, led by sharp increases in
energy prices. Inflation will likely average 8.1% in 2022, up sharply from 2.6% last year.
• The Bank of England raised its policy rate by 25 basis points to 0.50% in mid-March. The policy
rate is expected to reach a neutral rate of 2.50% in early 2025.
• Increases in social security contributions in April 2022 and the corporate tax rate in April 2023 will
contribute to slower growth.
• After a 9.4% plunge in 2020 and a 7.5% rebound in 2021, real GDP is projected to increase 2.8%
in 2022, and 1.2% in 2023 and 2024.

UK outlook summary

10 10
5 8
6
0
4
-5 2
-10 0
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

0.80 0
-50
0.75
-100
0.70
-150
0.65 -200
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

United Kingdom’s economic growth by sector

Percent change 2019 2020 2021 2022 2023 2024
Real GDP 1.7 -9.4 7.5 2.8 1.2 1.2
Fixed investment 0.5 -9.4 5.3 3.7 1.1 -1.4
Government consumption 4.2 -5.4 14.5 3.2 0.9 1.4
Exports 3.4 -13.9 -1.1 3.4 2.8 3.7
Imports 2.9 -15.9 3.0 2.9 3.1 3.7
Industrial production 3.6 -8.4 4.7 0.4 1.1 1.4

Emerging Europe’s outlook is darkened by the Russia-Ukraine war and

severe recessions in both countries
Real GDP • In 2022 real GDP is expected
12 to fall 11% in Russia and
about 40% in Ukraine.
8
• Sanctions and an exodus of

4 businesses will leave Russia
isolated for years to come.
0
• Supply disruptions are fueling
-4 inflation, leading to currency
depreciation and monetary
-8
policy tightening.
-12 • An influx of refugees to
Russia Turkey Poland Czechia Hungary Romania
Poland, Hungary, Slovakia,
2020 2021 2022 2023 2024–28
Moldova, and Romania is
Source: IHS Markit © 2022 IHS Markit creating additional pressures.

Russia will suffer substantial long-term economic losses as a result of its

invasion of Ukraine
• Through wide-ranging sanctions, trade restrictions, an exodus of multinational businesses, and
withdrawal of private investment, Russia will be isolated from the world economy for many years.
• Real GDP is projected to plummet 22% over the four quarters of 2022, reaching its lowest level
since 2006. Recovery is likely to be slow, taking until the 2030s to regain the 2021 peak.
• The forecast assumes losses in Russian oil production and exports (crude oil and products) of 1–3
million barrels/day through 2023. Output of metals and grains will be reduced but not stopped.
• When the rouble collapsed after the imposition of financial sanctions, the central bank raised its
policy rate from 9.5% to 20.0%. IHS Markit analysts expect rouble weakness and soaring inflation
will force the central bank to raise the rate to 30.0% in May.
• Consumer price inflation is projected to jump from 6.7% in 2021 to 23.6% in 2022, contributing to
sharp declines in real household incomes and spending. High interest rates, sanctions, and a
difficult operating environment will take a heavy toll on fixed investment.

Russia’s outlook summary

6 25
3 20
0
15
-3
10
-6
-9 5
-12 0
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

135 125
115 100
75
95
50
75 25
55 0
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

Russia’s economic growth by sector

Percent change 2019 2020 2021 2022 2023 2024
Real GDP 2.2 -2.7 4.7 -11.1 -3.7 0.3
Private consumption 3.1 -8.5 10.7 -14.9 -6.2 2.3
Fixed investment 1.5 -4.3 8.0 -16.8 -13.6 -0.3
Government consumption 2.4 4.0 0.4 3.1 -1.9 -0.8
Exports 0.7 -4.3 2.2 -10.9 -10.9 0.6
Imports 3.4 -12.0 12.7 -20.5 -20.0 -2.7

Japan’s economic growth and inflation remain subdued
• After a contraction in the third quarter, Japan’s real GDP advanced 1.1% q/q (revised down from
1.3%) in the fourth quarter of 2021, led by gains in consumer spending and exports.
• A surge in Omicron variant infections set back the economy in early 2022. A recovery in consumer
spending is expected in the second quarter, after quasi-states of emergency in 18 prefectures
were ended on 22 March. New COVID-19 infections have been falling since mid-February.
• Although energy costs will rise, direct impacts from the Russia-Ukraine war should be limited. In
2021, exports to Russia accounted for 1.1% of Japan’s total goods exports, while imports from
Russia were 1.8% of total goods imports. Trade with Ukraine is less than 0.1% of respective totals.
• Consumer prices fell 0.2% in 2021, pulled down by reduced cell phone charges. The recent surge
in commodity prices and strengthening domestic demand will push inflation up to 2.1% in 2022.
• After a 4.5% decline in 2020 and a 1.7% recovery in 2021, real GDP should increase 2.5% in 2022
and 1.7% in 2023. The 2022 forecast has been revised down by 0.4 percentage point.

Japan’s outlook summary

4 3
2
2
0
1
-2
-4 0
-6 -1
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

125 300
250
120 200
115 150
100
110 50
0
105 2015 2017 2019 2021 2023 2025
2015 2017 2019 2021 2023 2025

Real GDP growth in Asia Pacific’s major economies
Real GDP • Asia Pacific will lead long-run

9 global growth, benefiting from
regional trade liberalization.
6
• Net energy importers, such
3 as India, will be hurt by the

rise in energy prices resulting
0
from the Russia-Ukraine war.
-3
• Commodity exporters—
-6 Australia, Indonesia, and
Malaysia—should benefit
-9 from higher exports of
Mainland India South Korea Australia Indonesia Taiwan
China energy, metals, and grains.
2020 2021 2022 2023 2024–28

Real GDP growth in other Asia Pacific economies
Real GDP • The spread of COVID-19 led

8 to downgrades of forecasts of
6 South Korea and Hong Kong
SAR this month.
4
2 • COVID-19 variants pose risks
0 to countries that depend on
-2 tourism, notably Thailand.
-4
• The information technology
-6 and business process
-8 industries will support long-
-10 run growth in India, the
Thailand Hong Kong Malaysia Singapore Philippines Vietnam Philippines, and Malaysia.
2020 2021 2022 2023 2024–28

Mainland China’s economic growth is likely to fall short of the government’s

5.5% target in 2022
• Real GDP growth in 2022 has been revised down slightly to 5.1%, reflecting higher energy prices
and slower growth in European export markets resulting from the Russia-Ukraine war.
• Although exports, fixed investment, and retail sales posted strong gains in the first two months of
2022, new outbreaks of COVID-19 could dampen industrial activity and consumer spending this
spring. Lockdowns have been imposed in Shenzhen, Shanghai, Jilin, and Guangzhou.
• The government’s zero-COVID policy, decarbonization drive, deleveraging in real estate markets,
and regulatory crackdowns have weighed on most sectors mainland China’s economy.
• Economic stabilization is now the top policy goal. The government is cautiously easing monetary
policy, accelerating infrastructure investment, and providing tax rebates to small enterprises.
• Real GDP growth is projected to slow from 8.1% in 2021 to 5.1% in 2022 and 5.2% in 2023.

Monthly indicators signal a slowdown in mainland China’s economy
Caixin Purchasing Managers’ Index® data Key monthly indicators

60
60
Above 50 indicates expansion
55 50
Percent change, y/y

40
50
30
45 20
10
40
0
35 -10
-20
30
-30
2008 2010 2012 2014 2016 2018 2020 2022
25
2010 2012 2014 2016 2018 2020 2022 Industrial output Real merchandise exports
Manufacturing Services Real fixed investment Real retail sales
Source: IHS Markit © 2022 IHS Markit Source: National Bureau of Statistics of China, China Customs © 2022 IHS Markit

Mainland China’s outlook summary

10 3
8
2
6
4
1
2
0 0
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

7.0 400
6.8 300
6.6
200
6.4
100
6.2
6.0 0
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

Mainland China’s economy is resuming a long-term deceleration
Real GDP and industrial production • Productivity growth has

20 slowed in response to stalled
economic reforms.
15 • Headwinds include high
Percent change
corporate debt, deflation of a

real estate bubble, and a
10
decreasing working-age
population.
5 • Tensions with the United
States will lead to continued
0 sourcing diversification away
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 from mainland China.
Real GDP Industrial production

India will maintain 6% real GDP growth through 2030
• India’s real GDP growth slowed to 5.4% y/y in the October–December quarter from 8.5% in the
previous quarter. Real consumer spending rose 7.0% y/y, returning to its pre-pandemic level.
• However, fixed investment growth slowed to 2.0% y/y from 14.6% in the previous quarter, as firms
grapple with rising costs and low-capacity utilization.
• India will be among the Asia Pacific economies most adversely affected by the Russia-Ukraine
war, owing to its dependence on imported oil, food’s large share in household budgets, and high
sensitivity to capital outflows.
• Consumer prices rose 6.1% y/y in February and will accelerate this spring. In response, the
Reserve Bank of India is likely to raise its repurchase rate from 4.0% to 6.0% by October 2022.
• Real GDP growth will likely moderate from 8.8% in fiscal 2021 (ending 31 March) to 6.4% in fiscal
2022 and 5.9% in fiscal 2023.
• Consumer spending will drive India’s long-term growth, reflecting rising urbanization, improved
access to credit, and increasing numbers of middle- and high-income households.

India’s outlook summary

10 8
5
6
0
4
-5
-10 2
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

80 50
75 0
-50
70
-100
65 -150
60 -200
2015 2017 2019 2021 2023 2025 2015 2017 2019 2021 2023 2025

India’s economic growth by sector

Percent change 2019 2020 2021 2022 2023 2024
Real GDP 3.9 -6.8 8.8 6.4 5.9 5.8
Fixed investment 3.5 -10.3 12.4 6.2 9.4 9.7
Government consumption 4.9 4.1 4.4 10.4 1.7 3.7
Exports -3.4 -8.2 21.1 4.4 6.1 5.5
Imports -0.5 -13.7 33.6 9.8 9.9 11.2

Middle East and North Africa will benefit from tight energy markets amid the
Russia-Ukraine war
Real GDP • Rising energy and chemical
12 exports will support Gulf
Cooperation Council nations.
8
• Tourism will slowly recover,

affecting Egypt, Tunisia,
4
Morocco, Jordan, Israel,
Bahrain, and Saudi Arabia.
0
• Saudi Arabia will pursue an
-4 aggressive investment
strategy under Vision 2030.
-8 • Iran and the international
Saudi Arabia UAE Iran Egypt Israel
community are assumed to
2020 2021 2022 2023 2024–28
reach a deal that will lift oil-
Source: IHS Markit © 2022 IHS Markit related sanctions in 2022.

Sub-Saharan African economies face higher food and energy price inflation
and slower economic growth as a result of the Russia-Ukraine war
Real GDP • Kenya, Nigeria, South Africa,
8 and Tanzania import wheat
from Russia; while Djibouti,
Ethiopia, and Kenya rely on
4
wheat imports from Ukraine.
• Rising public-sector debt
0
service cause fiscal strains.
• Exports of oil and metals are
-4
rebounding, and tourism will
recover gradually.
-8 • Electricity shortages, fiscal
Nigeria South Africa Angola Ghana Ethiopia Kenya
consolidation, and higher
2020 2021 2022 2023 2024–28 interest rates will restrain
Source: IHS Markit © 2022 IHS Markit South Africa’s growth.

Risks to global growth
Downside risks to growth
• Further escalation of the Russia-Ukraine war, driving commodity prices higher

• Spread of new COVID-19 variants, delaying recoveries in consumer spending on services
• Persistently high inflation, forcing more aggressive monetary policy tightening
• Asset price corrections and stress in financial markets
• Debt buildup, a rise in nonperforming loans, and tighter credit conditions
Upside risks to growth
• Effective vaccines and treatments enable an end to restrictions on activities

• Travel and service sectors revive quickly
• Trade and investment policy uncertainties are favorably resolved

IHS Markit Customer Care

CustomerCare@ihsmarkit.com
Asia and the Pacific Rim
Japan: +81 3 6262 1887
Asia Pacific: +604 291 3600
Europe, Middle East, and Africa: +44 1344 328 300
Americas: +1 800 447 2273
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World Economic Outlook Including Regional and Country Outlook

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Economics and Country Risk

World Economic Outlook

World Economic Outlook

Confidential. © 2022 IHS Markit®. All rights reserved.

Copyright notice and disclaimer

Confidential. © 2022 IHS Markit®. All rights reserved. 2

Russia’s war against Ukraine reshapes geopolitical and economic outlooks

Confidential. © 2022 IHS Markit®. All rights reserved. 3

5 Eurozone -6.4 5.4 2.4 1.8

Confidential. © 2022 IHS Markit®. All rights reserved. 4

Purchasing Managers’ Index® data reflect regional variations in COVID-19

Index, over 50 signals expansion

Confidential. © 2022 IHS Markit®. All rights reserved. 5

Confidential. © 2022 IHS Markit®. All rights reserved. 6

COVID-19 vaccination rates continue to rise

Confidential. © 2022 IHS Markit®. All rights reserved. 7

Recovery timelines: Dates of sustained return to Q4 2019 level of real GDP

Q2 2020: Mainland China Q1 2022: United Arab Emirates

Confidential. © 2022 IHS Markit®. All rights reserved. 8

Real GDP (annual % change) • Growth will slow in response

Confidential. © 2022 IHS Markit®. All rights reserved. 9

Percent of world real GDP growth, 2021–31

Confidential. © 2022 IHS Markit®. All rights reserved. 10

Real GDP growth in key economies

Real GDP, advanced economies Real GDP, emerging markets

Confidential. © 2022 IHS Markit®. All rights reserved. 11

Policy interest rates are on different paths

Major advanced economies Key emerging markets

Percent, end of quarter

Confidential. © 2022 IHS Markit®. All rights reserved. 12

Long-term government bond yields are rising in most countries

Percent, annual average

Confidential. © 2022 IHS Markit®. All rights reserved. 13

2019 2020 2021 2022 2023 2024

Confidential. © 2022 IHS Markit®. All rights reserved. 14

Industrial materials prices remain volatile amid supply chain disruptions

IHS Markit Materials Price Index (MPI) • The Russia-Ukraine war is

problems, sending industrial

1 • As demand cools and supply

Confidential. © 2022 IHS Markit®. All rights reserved. 15

Expected losses in Russian production are temporarily driving up global

Arabia, UAE, US, Canada,

Confidential. © 2022 IHS Markit®. All rights reserved. 16

Resurgent demand and disrupted supply have fueled price inflation

Global real GDP, producer prices, and consumer Consumer prices

Eurozone 0.3 2.6 6.9 2.8

Confidential. © 2022 IHS Markit®. All rights reserved. 17

Consumer price inflation • Supply shortages and rising

0 • Consumer price inflation is

Confidential. © 2022 IHS Markit®. All rights reserved. 18

Consumer price inflation varies widely across regions

• The Russia-Ukraine war is Consumer price inflation

Annual percent change

Confidential. © 2022 IHS Markit®. All rights reserved. 19

The US dollar’s real exchange rate is rising

1.3 • The dollar could also benefit

Confidential. © 2022 IHS Markit®. All rights reserved. 20

Exchange rates per US dollar

Canadian dollar Euro

Japanese yen Chinese yuan

Confidential. © 2022 IHS Markit®. All rights reserved. 21

Emerging-market currencies on different paths: Russia’s rouble plunged

Confidential. © 2022 IHS Markit®. All rights reserved. 22

Confidential. © 2022 IHS Markit®. All rights reserved. 23