It’s been a turbulent time around the world. Global economies have been shaky over the past few years thanks to instances of political unrest, digital transitions, and the ever-present COVID-19 pandemic. Now being a few weeks into 2022, it’s time to look forward to the year ahead and see if a different kind of future awaits us.
What might economic growth look like in 2022? What can we expect from the coming twelve months? It’s not an answer anyone can make with certainty, especially with all the unknown factors still floating around.
However, there are a lot of conclusions we can come to about the future of US economic growth and predictions we can make on somewhat solid ground. Curious to learn about the economic growth rate and what the coming year might hold? Read on.
What Is Economic Growth?
Let’s go ahead and start with the basics. What is economic growth, and in what instances might someone try and use this term?
When economists use this phrase, they are usually referring to any kind of increase in a country’s production of economic goods and services. Most traditionally, economic growth has been measured in the form of gross national product or gross domestic product. GNP and GDP are often used, respectively.
The aggregate production in a country is often used to mark economic growth. Increased production leads to an increase in productivity, and this generally leads to an increase in income. When incomes are increased, consumers spend more and obtain a higher quality of life.
As tech, workers, and physical capita increase, the economic output of a country increases as well. When these things shrink or run into obstacles, the economic output of a country can decrease. Enough of a decrease or a loss will become a recession or depression.
There are a number of different ways a government might try to push forward economic growth.
They might support the development of new technologies, attempt to try to build the workforce or increase the number of physical goods being sold. Finance expert james robinson has talked about how the creation of inclusive institutions can help lead to better economic growth as well.
This will be important to keep in mind as we look to the obstacles and opportunities that lie ahead for 2022.
1. Covid Isn’t Done Wreaking Havoc
Even though we’re nearly two full calendar years into the pandemic era, COVID-19 remains the number one biggest risk to the global economy in the coming year. COVID has a way of impacting nearly all of the above elements needed for economic growth.
Should numbers remain high or new variant outbreaks get spread around, there’s a risk of another backslide in production and growth in the United States and abroad.
The ability of the Omicron variant to break through the protection of the double vaccinated surprised and frightened many over the past few months, and has many leaders in government and business uncertain about what steps they should take next.
Though additional boosters engineered for Omicron are on the way, the COVID-19 crisis remains hard to predict. No one can be certain what it’ll mean for the economic growth rate in the coming year, and no one should make any bets on the outcome.
2. Inflation Everywhere
Financial experts from around the world have been worried about the uptick in inflation over the past year. Inflation can be a real risk to economic growth as it impacts how much the average consumer can spend on goods.
It impacts the ability of new businesses and developing markets to properly come into being. While some of the inflation being experienced today is a result of the measures taken to combat the COVID-19 pandemic, there’s no real way to know for sure when or how the rise in prices might falter.
The Fed and Biden’s administration is taking steps to curb inflation, but it’s uncertain if the steps they are willing to take will successfully impede rising costs for the average American family.
Yellen, a speaker for the Fed, hoped that the return of Americans to the workforce could help ease supply chain pressures and help to bring inflation back down.
3. Rising Interest Rates
Another economic threat that is leaving many feeling uncertain? The steady rise of interest rates from money lenders across the world. Interest rates are increasing in the US and abroad, making it more prohibitive for the average person to borrow funds.
This can put pressure on the average consumer, and prevent others from taking advantage of the opportunity to launch new businesses or other economic enterprises.
Lower interest rates are key to a properly functioning and rapidly expanding country. US economic growth will continue to falter if these rates keep too many away from borrowing the funds they need.
The United States and Europe are particularly at risk in 2022 to see a continued increase in interest rates. The Fed and Biden administration is also working hard here to curb changes, but have found it difficult to make any headway thus far.
Economic Growth in 2022
If you’re worried about the financial reality in the coming year, you’re not alone. Many economists feel uncertain about what the economic growth rate might look like in 2022, as there are a number of major obstacles to a return to normalcy.
The above are just three major factors you’ll want to keep an eye on as the year ahead continues to develop.
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