The next big crisis, global growth slows and are we entering the endemic phase?
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
The endemic
We are “witnessing the transition of the virus from pandemic to endemic," the UK's education secretary told last week's Sunday Times. The Spanish PM echoed those sentiments on Monday. The Telegraph this morning covers comments from Wellcome Trust chief investment officer Nick Moakes, who says restrictions are no longer economically justified and "we are heading towards a situation where it is becoming endemic". The Wellcome Trust is the UK's biggest independent funder of medical research.
These are influential voices but experts are split on the issue. The World Health Organization (WHO) believes more than half of the European population could be infected with Omicron within the next two months and as a result we are "a way off" calling it endemic. Catherine Smallwood, senior emergencies officer at WHO Europe tells the FT there must be “stable circulation of the virus at predictable levels and potentially known and predictable waves of epidemic transmission” before Covid could be treated as endemic.
Hospital admissions are now falling in London and have stopped rising in most of England. Professor David Heymann of the London School of Hygiene and Tropical Medicine tells this morning's Times that Britain’s very high levels of immunity seem to be “keeping the virus at bay”. He predicts that Britain will be one of the first countries in the world to emerge from the pandemic.
The next crisis
We don't want to be accused of keeping things too light, so what about the next crisis? Every year, the World Economic Forum (WEF) produces a Global Risks report based on the views of 1,000 risk experts and global leaders in business, government and civil society.
This year's edition has a clear theme. Climate action failure, extreme weather events, and biodiversity loss and ecosystem collapse were considered the top global risks by severity over the next 10 years. Some 77% of respondents said international efforts to mitigate climate change have “not started” or are in “early development”.
The divergence in fortunes between advanced and developing economies is the next big theme. By 2024 developing economies (except China) will have fallen 5.5% below their pre-pandemic expected GDP growth, while advanced economies will have surpassed it by 0.9%. That's why societal risks make up a third of the top 10 risks, with societal cohesion erosion and livelihood crises completing the top five, while infectious diseases come in at number six.
Growth slows
Several of these themes dominate the World Bank's updated outlook, which suggests the global recovery is set to decelerate amid continued Covid-19 flare-ups, diminished policy support, and lingering supply bottlenecks. The organisation cut its forecasts for global growth to 4.1% in 2022 from 5.5% last year, with growth slowing to 3.2% by 2023.
Again, climate change is cited as a downside risk, largely due to its likelihood of increasing commodity price volatility. Meanwhile, some countries may eventually require debt restructuring and the Bank warns that social tensions may heighten as a result of the increase in inequality caused by the pandemic.
The report forecasts growth in advanced economies declining to 3.8% in 2022 from 5% in 2021, and dropping further to 2.3% in 2023, but said their output and investment would still return to their pre-pandemic trend by 2023.
The income squeeze
The inflation-driven cost of living squeeze is now showing up in various sentiment surveys. The latest from Scottish Widows, covered by Bloomberg, reveals UK households’ perceptions of their financial wellbeing declined at the fastest rate since the start of the pandemic.
The survey adds to a growing body of evidence that cash piles built up over the course of the pandemic are being unwound. Some 14% reported their household earnings declined in the last month, leading to the steepest drop in cash availability in almost eight years.
Bank of England data published last week revealed household borrowing increased in November for the first time since the onset of the pandemic as consumers borrowed an extra £900 million on credit cards. The amount flowing into National Savings and Investment Accounts fell to a net £4.7 billion, down from an average of £11.2 billion during the twelve months to October 2021.
In other news...
The architecture of tomorrow mimics nature to cool the planet (Bloomberg), Greenflation is coming (Bloomberg), rising house prices and loans zap Gen Z (Times), Gove’s attempt to fix UK cladding crisis looks set to end up in court (FT), monetary policy widens the gulf between poor and rich economies (FT), and finally, UK recruiter warns of wage inflation during fierce battle for staff (FT).