Three reasons to be cautious about 2022 growth – Natixis

Strategists at Natixis fear that 2022 will be a worse year for global growth than is widely thought. Weaker-than-expected global growth in 2022 would reinforce the downturn in commodity prices and the decline in inflation. 

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Weak growth in China

“China’s growth should be expected to be weak due to population ageing, caution among consumers (due to the combination of population ageing and a weak social welfare system), weak corporate investment in capital goods and new technologies under the effect of overindebtedness and political risk, the weakening of construction due to macroprudential measures and difficulties among developers, the high level of debt, which amplifies any growth slowdown.” 

Shift to a more restrictive fiscal policy

“Governments in many countries want to reduce their fiscal deficits sharply in 2022. The planned fiscal deficit reduction in 2022 is much greater than that which would spontaneously result from growth, which means that in 2022 there will be a significant reduction in the structural fiscal deficit, particularly in the US. The more restrictive fiscal policy in 2022 will definitely have a negative effect on growth.”

Caution among consumers 

“In China, consumers are cautious probably due to the prospect of population ageing in a country with a weak social welfare system, as we have seen. Consumers in OECD countries are also cautious, as the household savings rate remains higher than its pre-crisis level. Even though consumption is vigorous, there is no catch-up: the forced savings accumulated during the crisis are not being consumed.”

What consequences if global growth in 2022 is weaker than currently expected?

“This would cause a downturn in commodity prices and reduce supply chain bottlenecks and contribute to driving down inflation.”