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United States
The size of the US economy is back above its pre-pandemic peak. Fiscal policy swung from being a support for growth to a drag in 2021. That drag will get bigger in 2022. The Democrats confront a challenging political backdrop but based on history, markets don’t mind a divided government.
GDP %
Source: Bloomberg
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Europe
The European economy is still just shy of its pre-pandemic peak weighed down by slowing trade with China. Tensions will likely flare between a German-led “sound finance” camp and their Southern neighbours more concerned with avoiding a repeat of last decade’s austerity-driven slump.
GDP %
Source: Bloomberg
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China
2022 is a pivotal year with the 20th Party Congress where President Xi will seek confirmation of his third unlimited term. Political and social stability will be prioritised over growth as a result. Domestic priorities will take centre stage where heightened communist rule means tighter limits on the private sector.
GDP %
Source: Bloomberg
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Japan
Japan’s new prime minister has pivoted away from his predecessor’s “Abenomics” economic policy that balanced fiscal spending with higher consumption taxes. Instead, Kishida is more focused on reducing inequality and reviving the economy before restoring fiscal balance.
GDP %
Source: Bloomberg
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Australia
Delta hit the Australian economy harder than most other OECD nations leaving GDP still slightly lower than its pre-pandemic peak. The heavily indebted household balance sheet has some support from excess savings and a central bank that promises to be among the most patient in the world.
GDP %
Source: Bloomberg
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United Kingdom
The UK economy still remains some 2% below its pre-pandemic peak. Around 70% of UK corporate earnings come from offshore, so one near-term risk is that further strengthening of the British pound dampens earnings growth. It also means supply chain disruptions and labour shortages could linger longer leaving inflation to moderate only gradually.
GDP %
Source: Bloomberg
