THE Covid pandemic has disrupted global economies in 2021, and continuing to do so with the recent emergence of the Omicron variant that is now found in 63 countries, as per the World Health Organisation (WHO).
Will 2022 then be the year for recovery? A question the Mastercard Economics Institute sought to answer in its newly-released global economic outlook report, Economy 2022.
The report provides insight into how the global economy could evolve in 2022 against the backdrop of consumer and business trends and ongoing risks. It reveals five fundamental factors that will continue to shape the global economy — digital acceleration, travel, savings and spending, supply chains and a growing list of economic risks.
Here are the key findings:
Digital: 20% of the digital shift in retail stays put, reshaping how and what consumers buy. E-commerce subscriptions gained traction in 2021 as nearly 88% of countries across 32 markets saw a surge in subscription services compared to the previous year. On average, retail subscription share of total spend increased by a factor of 1.25 from 2020 to 2021 across six Asia Pacific (APAC) markets. Car companies, virtual workout partners, bike rentals and pet services are among a slew of businesses benefitting from this model.
Travel: Uptick in leisure travel recovery as international travel opens up, with medium and long-haul flights to gain ground in 2022. While travel restrictions impacted the slow rate of recovery across APAC in 2021 that saw only a few markets in the region having a rebound in domestic travel, the view for 2022 is optimistic across the region.
Savings and spending: Excess savings in APAC developed economies are a source of strength in consumption in 2022 and beyond. A faster scenario for spending excess savings would mean a two percentage point acceleration in consumer spending growth for several markets in 2022 including Australia, New Zealand, Japan and Korea. Globally, consumer spending of built-up savings could contribute an additional three percentage points to global GDP growth in 2022 as pandemic restrictions ease.
Supply chains: Household spending on services in Asia is expected to accelerate, with demand for goods staying robust in 2022. While supply chain disruptions continue to linger on, prolonging high logistics costs and a surge in global commodity prices, exports remain a major positive factor for the region.
Risks: Risks remain with the potential to disrupt the global economy. New Covid variants like Omicron pose the biggest immediate risk. However, there are identified additional risks that have the potential to derail recovery, including a sharp recalibration of housing prices, a surge in oil prices, and fiscal cliffs in advanced economies.
“Although the past year remained shrouded in uncertainty, we are optimistic about the year ahead, and expect 2022 to be the year of travel recovery for Asia,” said David Mann, chief economist, Mastercard Asia Pacific & MEA.
“Whilst the recovery trend across the region may be non-linear we anticipate pent-up demand and savings will finally be released by consumers, evidenced by the recovery of ‘out-and-about’ categories such as apparel and beauty.
“The continued strength in e-commerce and pandemic categories, such as home improvements and hobbies, will also be bolstered by a steady rise in the subscription economy, painting a positive picture despite the lingering threats of new variants, inflation and supply chain disruption.”
* Download the Economy 2022 report here.
• Featured image credit: Suwaree Tangbovornpichet/Getty Images
