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Opinion
David Brown
David Brown

Macroscope | With no Plan B, the global economy must brace itself for another ‘black swan’ event

  • A new Covid-19 variant, rampant inflation, a financial crash and climate disasters are just some of the potential crises that could sink tentative global recovery. Overstretched governments and central banks cannot afford to be complacent

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A person holds a sign at a checkpoint as revellers gather ahead of New Year’s Eve celebrations in New York’s Times Square on December 31. Despite record numbers of Covid-19 cases across the city and nationwide, the celebrations went ahead. Photo: Getty Images / AFP
David Brown

It will be tough enough dealing with the known challenges facing the world in 2022, without having to contend with any more random shocks. The world has suffered a bellyful of hard knocks in recent years and the worry is whether any “black swan” events will sweep in, and if there will be much capacity left to contain them.

Any nasty surprises could be lethal for global growth this year, not least a new Covid-19 variant emerging, surging inflation risks, another financial crash, or even climate change taking a turn for the worse. The list is not exhaustive.

Global governments and central banks are overstretched and would need to dig deep to find bigger monetary and fiscal resources to make a difference.

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The hope is that global recovery stays on track in 2022, but if things do start to go awry, policymakers might need to consider alternative policy options. Have we really seen the last of lower global interest rates in this cycle?

A cashier scans goods at a Waitrose supermarket in London on December 29. Inflation in Britain has rocketed to its highest level for more than 10 years on broad-based price gains, data showed last month. Surging inflation risks could torpedo global growth this year. Photo: AFP
A cashier scans goods at a Waitrose supermarket in London on December 29. Inflation in Britain has rocketed to its highest level for more than 10 years on broad-based price gains, data showed last month. Surging inflation risks could torpedo global growth this year. Photo: AFP
The world needs a break after the terrible toll of the pandemic and it will be difficult enough keeping recovery on track to hit the 4.9 per cent global growth rate which the International Monetary Fund is forecasting for 2022.
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