The editor-in-chief of the magazine, Tom Standage, emphasizes in his editorial in the special issue that “2022 will be the year of adaptation to the new normal after the pandemic”. According to the Economic Intelligence analysis to Standage, the 2022 pandemic may turn into an endemic with new treatments and vaccinations, inflation concerns will continue, the conflicts between the US democracy and the Chinese autocracy, the transformation of employment to working from home, the growth in cryptos, technology and space wars between superpowers will occupy the agenda, It will be a year in which global travel will have difficulty returning to its old days and the climate crisis will continue to be at the center of the transformation discussions.
GLOBAL GROWTH
Predicting the global economy to grow by 4.4 percent in 2022, Economic Intelligence draws attention to the fact that the growth will not be evenly distributed. The withdrawal of support by governments and central banks and the start of some central banks to increase interest rates will be one of the most important factors that strengthen the dollar and reduce inflation pressures in 2022. In the analyzes made by Economic Intelligence, 10 important business trends that will guide the course in different sectors in 2022 are listed as follows:
TIGHTENING CYCLE: Exiting ultra-loose monetary policies. The US Federal Reserve (Fed) is expected to rapidly reduce its asset purchases and start raising interest rates towards the end of 2022. By the end of 2022, the projected federal funds rate is expected to reach 0.63 from the current level of 0.13.
COVID-19 AND VACCINES: Although healthcare services will be disrupted again with new variants such as Omicron, investments in vaccine production capacities will increase the total vaccine capacity by 5 times – to 22 billion doses.
SLOWING ONLINE: Online retail, which had a share of 10 percent in total retail sales in 2019 and increased to 17 percent by 2021, continues to grow, but will slow down with the removal of restrictions.
DISTINCTIONS IN TOURISM: The sector will not have an easy year in 2022 either. International flights will not catch up with 2019 even with an increase of 50 percent. Each new restriction will mean a new challenge for the industry.
ENERGY INFLATION: Although the OPEC+ alliance continues to increase oil production, oil prices are expected to remain 10% higher in 2022. Especially in Europe, natural gas prices will continue to keep their high course and will continue to push the producers.
COMMODITY INFLATION: Although the EI commodity price index will show a slight decrease in 2022, prices will remain high above pre-pandemic levels due to strong demand.
5G INVESTMENTS: 41 of the 60 largest countries will be using 5G technology in the first months of 2022. It will lead Latin America and Asia bandwidth auctions. The US will begin 6G trials.
GIANT INFRASTRUCTURE PACKAGES: The government’s giant infrastructure packages in the USA and China will increase global infrastructure spending by 5 percent to $25 trillion.
WEST-CHINA TENSION: NATO’s focus will continue to shift to Asia. The United States is expected to increase its anti-Chinese military spending by 1.6 percent, and China is expected to respond by increasing its spending by 7 percent.
BOOSTER RECORDS IN THE CINEMA: Hollywood is hopeful for 2022. With the return of the cinema audience, who missed the big screen for a long time, to the theaters, $ 9 billion box office revenue is expected in the USA. China is the other giant player of the industry.
SECTORS
AUTOMOTIVE
Well, it will accelerate, total sales will not reach 2019
It is predicted that new vehicle sales will not be able to reach 2019 levels in 2022 due to the ongoing chip crisis and supply bottlenecks. Compared to 2021, new vehicle sales will increase by 6 percent and commercial vehicle sales by 7 percent. Europe will be the region with the strongest rebound, with the USA in second place. Half of global sales will continue to come from Asia. The US-China technology wars will aggravate the negative effects of the chip crisis on the automotive industry. The share of electric vehicle sales will increase from 4 percent in 2019 to 9 percent. The US will spend 174 billion dollars on electric vehicles. 4 million of the 5.6 million electric vehicle sales will take place in China. Toyota Japan will launch its first fully electric vehicle. Backed by VinFast and Alibaba in Vietnam, Zhiji is one of the new players in the industry. Investments in charging and battery infrastructures will continue, but the raw material bottleneck will make battery supply difficult. Autonomous will also be slow to progress, although the gears will increase.
DEFENSE-AVIATION
Defense budgets will rise
Commercial aircraft production will increase with the activity experienced at airports. Boeing’s banned 737 MAX will begin its flights. Airbus and Boeing will accelerate their production especially in narrow-body jet aircraft used in short-haul flights. According to Moody’s predictions, commercial aviation will not be able to reach 2019 levels.
Defense spending will increase. NATO leaving Afghanistan is shifting its focus to China. The US, which has the largest defense budget, will increase its military spending by 1.6 percent against China. China will also increase its defense budget by 7 percent. Governments’ cyberattack concerns will benefit security companies. The US will prevent military satellites from making “cyber sorties” with Boeing’s help.
ENERGY
Energy will not be cheaper in 2022
Energy prices are expected to remain high in 2022 as well, due to reopenings in 2021 and strong demand. It is expected that Brent oil will be 10 percent more expensive than in 2021, and the barrel price will be traded at an average of $ 79 in 2022. The gradual increase in OPEC+ production will prevent Brent from rising further. Although there is a slight decrease in natural gas, which broke records in Europe, compared to 2021, prices will continue to be two or three times higher than in 2019. Extreme cold can push prices even higher. Increasing demand for oil and natural gas will also increase carbon emissions. Although the share of renewables in giants such as the USA and China has increased by 10 percent compared to the pre-pandemic period, the dominance of dirty energy sources will continue. Nuclear fusion is one of the biggest hopes for sustainable energy, which must accelerate to combat the climate crisis.
ENTERTAINMENT
Game industry is strong, cinemas are hopeful too
In the analysis published before it was understood that Omicron is a variant that spreads much faster than Delta, it is predicted that movie theaters will fill up again in 2022, when economies are not expected to implement strict quarantines again. According to PwC projections, movie box office revenues will increase by 58 percent in 2022 compared to 2021. But even this comeback results in the box office closing below 10 percent in 2019. Streaming giants will pour big bucks on original content – Netflix alone could spend $17 billion. The gaming industry, on the other hand, will generate 168 billion dollars in revenue, an increase of 32 percent compared to the pre-pandemic period, despite the restrictions imposed in China. Streaming platforms such as Netflix are also entering the industry, where the leadership battles of giants such as Amazon, Apple, Google, Microsoft, Sony and Tencent continue. However, all these game companies are also turning to ‘metaverse’ technologies led by Facebook.
BANKING
Authorities will sleep with fintek
If inflation pressures continue in the global tightening cycle led by the Fed, interest rates will rise and risks increase for weak banks. In the worst-case scenario, Europe’s bad debts could reach €1.4 trillion ($1.6 trillion). The rate of bad loans in India can reach 11%. In the best-case scenario, the tightening is very gradual and global banking assets could reach $187 trillion in 2022, up 6 percent. Authorities trying to catch up with the fintech boom will focus on regulations for new financial technologies. In developed economies, the cautious attitude towards cryptocurrencies will continue, as policy makers are worried that they cause instability in financial markets. Governments will try to take control with digital banking licenses and develop their own digital currencies. “Buy now, pay later” services will become an online alternative to credit cards. IPOs will finance the fintech boom.
FOOD AND AGRICULTURE
Prices will remain well above 2019
The food price index of Economist Intelligence, which monitors food, food and beverage prices, will decrease by only 1 percent in 2022 and will maintain its course well above the pre-pandemic level. In 2021, very strong decreases in prices are not expected, with strong demand for animal feed and worsening yields in some countries. With the slowdown in economic growth, supply bottlenecks will also ease. Although the increase in corn stocks will bring a 5 percent decrease in prices, it will still be 45 percent more expensive compared to 2019. The production increase in oilseed prices, which increased by 43% in 2021, will bring a price decrease of 3 percent. A similar trend is expected for soybeans. Global tea consumption will increase by 4 percent and its prices will increase by 8 percent. In 2021, coffee prices, which have seen a price increase of more than 20 percent due to the cold weather in Brazil, will be a pullback due to hot weather. Global warming will cause extraordinary developments such as the avocado harvest in Italy. Start-ups and food giants will try to solve the 1.6 billion tons of waste food problem worth 750 billion dollars.
HEALTH
Vaccine production doubles
New dangerous and infectious variants such as Omicron will continue to pose risks to health systems and economies in 2022. Increasing vaccine inequality continues between developed and poor countries. However, this bottleneck may be alleviated with a significant increase in vaccine production capacities. It is predicted that the world’s COVID-19 vaccine production capacity will increase by 5 times and 22 billion doses of vaccine will be produced in 2022. As the vaccine accelerates, ‘zero COVID’ policies in China and some countries that risk suppressing global supply chains are expected to loosen. It is predicted that global health expenditures will increase by 5 percent, and expenditures will rise above the average with the social policies of the Democrats in the USA. It is feared that death rates in cancer may increase due to the pandemic. The number of mental illnesses is also expected to increase.
INFRASTRUCTURE
USA and China will lead
With the effect of China’s giant infrastructure plans and US President Joe Biden’s 1 trillion dollar infrastructure package, global infrastructure investments will increase by 6 percent and reach 25 trillion dollars. The most attractive global infrastructure expenditures are expected to be telecommunications networks, logistics and clean energy. Of the $25 trillion infrastructure spending, $12 trillion will take place in China. In the US, the focus of infrastructure spending is transportation, clean energy, electric vehicles and bandwidth. China’s Road Belt project and the alternative infrastructure project of the G7 countries will continue to clash.
INFORMATION TECHNOLOGIES
IT market will grow by 4 percent, software by 12 percent
The fact that the pandemic has increased the need for digitalization much faster than expected will enable companies to continue their investments in information technologies. From remote work to freight tracking in foreign trade, companies are making investments in many areas depending on their pandemic needs. In 2022, when these expenditures will continue, the global IT market is expected to grow by 4 percent. According to Gartner forecasts, software is the shining star of the IT market with 12 percent growth. The rise of hybrid operating systems and the cybersecurity needs of governments are key drivers of market growth. Gartner projects advanced governments’ spending on the Internet of Things (IoT), critical to their monitoring activities, to reach $21.3 billion in 2022.
ADVERTISING
The share of digital will reach 51 percent
Global advertising expenditures, which managed to catch up with the pre-pandemic period in 2021, will increase by 7 percent according to the projections of Japanese media giant Dentsu. Advertising growth in major consumer markets such as the US, UK, India and Russia is expected to be even faster – thanks to companies looking to regain lost consumers. A 19 percent increase is expected in advertising expenditures such as billboards and posters, as vaccinated consumers return to the streets. The share of digital in advertising can reach 51 percent. Mobile ads will account for more than 64 percent of internet spending. In the US, Amazon controls 10 percent of the digital advertising market. eMarketer says that e-commerce giants will try to increase this share even more. It is expected that the support of the digital versions of the newspapers and magazines that companies advertise will increase.
MINING
Copper will rise 4 percent, steel will fall
Industrial commodity prices rose by nearly 40 percent in 2021, the fastest rise of the last decade. A pullback in prices is expected in 2022 with the slowdown in global growth and the relaxation of supply bottlenecks due to the pandemic. While a 1.1 percent decrease is expected in metal prices, it is predicted that the decrease in prices of some metals, including steel, will be more severe. Prices in many metals will find direction according to the course of the Chinese economy. Green energy transition and urbanization will keep demand for copper and aluminum strong. There is a nationalization of mining companies in Peru, the world’s largest copper producer. Copper prices, which are already on record, are expected to rise another 4% in 2022 due to the need for green transformation products such as electric vehicles. However, if the authorities are too strict in the conversion, it can negatively affect the production of aluminum and steel.
REAL ESTATE
Tenant evictions will begin
Evacuations will begin with the end of rent protection support provided by governments during the pandemic in the global real estate sector. Companies will downsize their offices, stores will continue to close due to the increase in online sales. But online stores will need warehouse space. In Europe alone, 4 million square meters of warehouse space will be added to the total supply. Interest rate hikes and monetary tightening will slow down real estate loans. Real estate taxes may be increased in developed economies such as the UK, Spain and Canada. As priorities change, remote work will increase demand for private resorts from the Bahamas to Maruitius. Interest in cities with good infrastructure such as London, Frankfurt and Singapore will increase and the share of foreign investors in the rental real estate market in these cities will increase to 47 percent. Office rents will increase towards the end of 2022. Regulatory pressures will also be monitored to make the construction industry more sustainable.
RETAIL
Fast delivery will exceed the limits
Online will increase its share of total retail sales to 17 percent. However, as governments ease restrictions, the annual growth rate of the sector will slow to 13 percent. Authorities will continue to punish e-commerce companies that distort competition and abuse their power. 22% of international merchandise sales will come from e-commerce. Asia and America are more prone to online shopping, European consumers are more distant. However, it is stated that due to the pandemic, new players may enter the fast delivery market, which includes pioneers such as Getir in many developed markets, including Europe, and companies will grow by exceeding the borders of the country. In the analysis of Economist Intelligence, it is predicted that Getir, which opened to Europe with its fast delivery service, will also start to meet the need in the US market. According to the analysis, 1.4 billion Chinese consumers will spend $437 billion on clothing and shoes. However, the US-China tensions over Xinjiang cotton and Uyghur human rights violations are directing the nationalist Chinese youth to local brands.
TELECOMMUNICATION
Gears will rise in 5G
In the first months of 2022, 5G networks will become widespread in 41 percent of the 60 largest markets. Significant 5G spectrum auctions will be held in Latin America and Asia. India will lag behind on 5G due to its fight against the pandemic. More than 600 thousand 5G base stations will be installed in the largest markets. 6G experiments will also begin in the US and some economies in Asia. However, the ongoing chip crisis may cause delays in the production of 5G compatible services and smart devices such as mobile phones. The strongest growth in mobile and fixed bandwidth subscriptions is in Latin America and North Africa.
TRAVEL AND TOURISM
Consolidation can be seen in aviation
In the global tourism sector, 2019 levels will not be reached, but the number of international tourists is expected to reach 1.1 billion, with an increase of 50 percent compared to 2021. Due to the new restrictions brought with Omicron and the decrease in business travel, the number of 1.5 billion tourists seen in 2019 does not seem possible for 2022. Cash continues to melt in the aviation industry and a consolidation can be seen in the industry. Before the pandemic, China, the largest tourist source of the global economy, will open its borders only to Hong Kong and Macau. Many countries will reopen their borders to foreign tourists thanks to vaccine-testing-tracking systems, but domestic tourists will continue to be of critical importance for the sector.
Fighting inflation could bring recessions in 2023 and 2024
According to the report, global GDP will rise as the recovery from the health and economic crisis caused by COVID-19 continues, but if inflation continues, it will be difficult for policy makers to prevent economies from falling back into recession.
CEBR Vice President Douglas McWilliams, in his assessment on the subject, said, “The important issue for the 2020s is how the world economies will fight inflation.” used the phrase.
McWilliams claimed that they hoped that a “modest” adjustment in monetary policy would bring the non-temporary elements under control, and that the world economy would have to prepare for a recession in 2023 or 2024 unless inflation was brought under control.
“SUPPLY CHAIN DEFECTS WILL CONTINUE IN 2022”
Euler Hermes, one of the world’s largest credit insurance companies, emphasizes that supply chain disruptions will continue in 2022 in its report, which closely examines the developments in global trade in the coming period. Euler Hermes predicts that the global trade volume, which increased by 8.3 percent in 2021, will gradually return to its pre-crisis long-term average and increase by 5.4 percent and 4 percent in 2022 and 2023, respectively. In the Global Trade Report, which closely examines many factors affecting trade such as logistics bottlenecks, dependence on Chinese imports, the status of ports, the effects of COVID-19, the effects of global supply chain disruptions, COVID-19 and the volatility of the Chinese New Year in the demand and logistics wing. It is expected to remain high until the second half of 2022.
Energy, electronics and machinery exports will continue to be strong
While the sectors that will continue their exports in 2022 are listed as energy, electronics, machinery and equipment, it is stated that the winner of exports in 2023 will be the automotive sector.
In the report, it is emphasized that global goods trade, which has been performing strongly since the second half of 2020, contracted in the third quarter of this year, 75 percent of this contraction was due to production deficits and the rest was due to logistics bottlenecks.
3 factors that will normalize trade
Supply chain disruptions due to global supply-demand and mismatches in shipping capacity triggered by the COVID-19 outbreak are expected to decline in the next period after peaking. The three factors that will be effective in the return of trade to normal starting from the second half of 2022 are listed as follows:
SLOWING CONSUMPTION: Consumer spending on durable goods slowing down as replacement times are long and sustainable consumption behaviors are starting to be adopted.
INCREASE IN STOCKS: Input problems eased due to the increase in capital expenditures, especially in the USA, and the fact that inventories in most sectors returned to pre-crisis levels or even exceeded those levels.
INCREASE IN CAPACITIES: Decreased transport congestions as capacity increases.
The winner of the export will be Asia-Pacific
In terms of exports, Asia-Pacific will continue to be the main winner for the next few years, with gains of more than $3 trillion in 2021-2023 after a loss of $420 billion in 2020. More than half of these gains will be achieved in 2021. This will be followed by gains of $630 billion in 2022 and $710 billion in 2023. The overall performance of European exporters in the 2021-2023 period will also be similar to that in Asia-Pacific. North America’s export earnings are expected to approach $800 billion in the 2021-2023 period. The sectors that performed well in 2021, such as the energy, electronics and machinery and equipment sectors, will continue to maintain their exports strongly in 2022. The number one winner of exports in 2023 will be automotive, thanks to the workload and low capital expenditures in 2021.
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