Looking Back at 2022: From COVID-19 Recovery to Geopolitical Shocks


Quarter 1 2022

Post pandemic recovery threatened by the Russia-Ukraine war

The year started with a weakened global economy as countries reimposed mobility restrictions as the new Omicron COVID-19 variant was detected in late 2021. The start of the year witnessed rising energy costs and supply interruptions, resulting in spiralling inflation accross the globe (IMF, 2022). Furthermore, record debt and soaring inflation limited many governments’ ability to respond to new economic risks. In January 2022, the IMF projected global growth at 4.4%, a 0.5 percentage point lower than previous forecasts led by the slowdowns in the US and China (Gopinath, 2022).

However, the economic outlook as from April 2022, showed how global economic prospects deteriorated dramatically within just the first quarter. The January predictions suggested that worldwide recovery would improve beginning in the second quarter of this year, following the short-lived impact of the Omicron version. Since then, the prognosis deteriorated, owing in great part to Russia’s decision to invade Ukraine, which resulted in a catastrophic humanitarian situation in Eastern Europe, and a host of sanctions being introduced, aimed at putting pressure on Russia to halt hostilities. This crisis occurred at a time when the global economy was on a path to recovery.

Ukraine’s war triggered an expensive humanitarian crisis, but not all nations viewed it in the same way. While the developed world expressed outrage and disdain at Russia, the developing world was divided. China and many African nations stood by Russia, while India took positions on both sides, depending on who was visiting the nation at the time. The conflict’s economic costs would lead to a major slowdown in the global economy in 2022, and a looming crisis for global food supplies. A catastrophic double-digit loss in GDP for Ukraine and a significant recession in Russia were witnessed, with global spillovers through commodities markets, trade, and financial channels. Fuel and food prices have risen significantly as a result of the invasion, disproportionately affecting vulnerable populations, particularly those in low-income nations. Inflationary pressures exacerbated the trade-offs that central banks had to make between limiting inflation and protecting growth. Price stabilisation efforts eventually lead to interest rates rising. As a result of the invasion, a substantial number of countries have suspended commercial relations with Russia, threatening to undermine the post-pandemic recovery. The events have also jeopardised the rule-based structures that have permitted increased global economic integration and helped millions escape poverty (IMF, 2022).

“Post the Russian invasion of Ukraine, repercussions of the war are being felt not only within Ukraine but across the world; and the African continent is no exception. After having been hit hard by the COVID-19 pandemic, Africa risks another tough spell as a result of the ongoing crisis.”  International Economic’s CEO insight July 2022

Quarter 2 2022

Inflationary pressures and increasing supply chain concerns lead to a cost of living crisis across the globe

Despite the economic slump, inflationary pressures are proving to be more widespread and persistent than expected. Global inflation is now predicted to peak this year at 9.5 percent, before falling to 4.1 percent by 2024. Inflation is spreading well beyond food and energy product groups.

Increasing cost pressures, which compress real earnings and undermine macroeconomic stability, constitute the most direct danger to current and future prosperity. Central banks are now laser-focused on restoring price stability, and the rate of tightening has picked up significantly. Both under- and over-tightening monetary policy poses dangers. Under-tightening would exacerbate inflation, damage central banks’ credibility, and increase  inflation expectations. The structural changes in the rebalancing of energy sources in the aftermath of the conflict is expected to last long-term.  Pandemic factory shutdowns in Asia have resulted in a scarcity of semiconductors, a crucial component in everyday consumer goods. Shipping companies lowered capacity by 11% during the epidemic in expectation of lower demand, raising global shipping rates. In the year leading up to September 2021, the average cost of transporting a large 40 foot container surged fourfold. This transmitted to higher prices for commodities (Institute for Government, 2022).

In June, the WTO Ministerial Conference (MC-12) was a key event of the second quarter of 2022. WTO Members decided to continue their existing practice of not charging customs taxes on electronic transmissions until the next Ministerial conference (MC-13), which is planned to be held by December 31, 2023. Members also agreed to re-energise the Work Programme on Electronic Commerce and to deepen talks about the moratorium, particularly its scope, definition, and impact on customs duties. Members also formally accepted the Draft Ministerial Declaration on Emergency Responses to Food Insecurity and the Draft Ministerial Declaration on World Food Programme Food Purchases Exemption from Export Prohibitions or Restrictions in the area of food security. Moreover, in terms of fisheries subsidies, Members reached an agreement on the long-running talks about fisheries subsidies, intending to remove subsidies for illegal, unregulated, and unreported (IUU) fishing operations.

“That the summit was able to score some key deals in response to a group of urgent issues gives some hope that the WTO is still relevant as the forum for advancing contemporary global trade-related interests”. International Economic’s CEO insight July 2022

Quarter 3 2022

UK economic turmoil

Since the start of the year, the UK voted in 3 Prime Ministers by the 3rd quarter of 2022, replaced 4 Chancellors of Exchequers and experienced the highest macro-instability in decades, owing in significant part due a misplaced budget from Liz Truss’s shortlived premiership. According to figures issued by the Office for National Statistics (ONS), the UK’s GDP declined by 0.2% in the third quarter. As reported by the ONS, monthly GDP was down 0.6% in September alone, with the Queen of England’s passing and associated funeral accounting for at least half of the decrease in output (Albert, 2022). Electricity and gas costs more than quadrupled in a year, and house loan interest rates doubled to 6%. In September, inflation was 10.1% year on year, reducing purchasing power significantly. Consequently, household consumption declined by 0.5% in the third quarter, as expected. The Consumer Price Index (CPI) increase by 8.7% in Q3. The CPI rate is predicted to fall to 5% in 2023 before returning to the Bank of England’s 2% objective in 2024 (British Chambers of Commerce, 2022).

The value of the Pound has seen some daily volatility (jumping 2-3% on some days). The rising costs of food, fuel, energy, transport and the effect of the war in Ukraine are already having a severe impact on the domestic market, leading to higher inflation rates. And, these global economic conditions are already having a severe impact on the Pound”. International Economics CEO Paul Baker, interview July 2022

China trade boom

China’s economy expanded significantly in the July-September quarter, with GDP increasing by 3.9 percent year on year to around USD 4.32 trillion (30.76 trillion yuan), up from 0.4 percent growth in Q2, 2022 (Arabian Business, 2022). The third-quarter GDP growth rate exceeded market forecasts of 3.4 percent, thanks to a series of stimulus measures from Beijing. According to a breakdown of the statistics, value-added industrial output by big industrial enterprises increased 4.8 percent year on year in the third quarter, 4.1 percentage points quicker than in the second quarter (Woo & Zhang, 2022). With economic activity generally improving, China’s consumer market was boyant in the third quarter, with total retail sales of consumer products rising 3.5 percent year on year, reversing a 4.6 percent loss in the second quarter. Quarter 3 exports from the country, were at  their highest since the start of the COVID-19 pandemic at USD 931 billion. Despite this, China continued a series of lockdowns due to COVID, creating social tensions and inflicting economic uncertainty.

Quarter 4 2022

US China microchip war

China is the target of new sweeping and severe export controls from the US. At the start of October 2022, the Biden Administration issued sweeping restrictions on selling semiconductors and chip-making equipment to China. As a result of the move, companies will have to request a special license to supply advanced computing chips, chip-making equipment, and other products to China. In addition to this, the US also imposed international sanctions that will restrict companies based in other parts of the world from selling chips used in AI and supercomputing in China if they are based on US origin technology, software or machinery (called “foreign direct product rule bans”). Thus, the implications on Chinese production networks will be swift and severe. The measures will impact many American companies whose sales to China contribute a vital source of revenue that allows them to reinvest in research and development. The US chip ban is seen as an attempt to curb China’s access to critical technologies, from supercomputing to guiding weapons, and their use for the East Asia country’s military and economic ambitions. The response by Beijing might be quite combative, as it was during the trade war that started with the Trump Administration. In reaction to past US sanctions on Huawei, China chose to use soft diplomacy. This is unlikely to be the case on this occasion. Beijing might impose restrictions on American companies or firms from other countries that comply with US rules with operations in China in retaliation.

The US chip ban is seen as an attempt to curb China’s access to critical technologies, from supercomputing to guiding weapons, and their use for the East Asia country’s military and economic ambitions. Compared to the crackdown on Huawei a few years ago, this move is much broader in scope and will affect not only Chinese firms but also other large chip makers with facilities in China (for example, China account for 5.5% of US’ wafer capacity), not to mention the other downstream producers of semiconductors industries.

The response by Beijing might be quite combative, as it was during the trade war that started with the Trump Administration. In reaction to past US sanctions on Huawei, China chose to use soft diplomacy. This is unlikely to be the case on this occasion. Beijing might impose restrictions on American companies or firms from other countries that comply with US rules with operations in China in retaliation. The world needs to brace for a storm in almost all segments of international trade. International Economics CEO insights October See the interview of International Economics’ CEO on CNBC here.

Bali G20 Summit

The 17th Group of 20 (G20) Heads of State and Government Summit was held in Bali, Indonesia, in October 2022. The G20 met in 2022 under the Indonesian Presidency with the theme ‘Recover Together, Recover Stronger’ (IISD, 2022). The Leaders’ Summit marked the culmination of the G20 process and the year’s intensive work through Ministerial Meetings, Working Groups, and Engagement Groups. Leaders of the world’s Group of 20 (G20) wealthiest nations ended a two-day meeting on the Indonesian island of Bali, condemning Russia’s actions in Ukraine “in the strongest terms,” among other issues. In their communiqué, the G20 economies agreed to carefully manage interest rate rises to avoid spillovers and warned of “increasing volatility” in currency fluctuations, a stark contrast to last year’s focus on healing the wounds of the COVID-19 pandemic. The mention of spillovers alluded to emerging economies’ concerns about massive capital outflows if aggressive US rate hikes continue. With the Ukraine war and hefty pandemic-era expenditure packages accused of fueling high inflation, the G20 countries agreed that additional fiscal stimulus should be “temporary and targeted.” Concerned about the deteriorating debt status of several middle-income countries, they emphasised the significance of all creditors bearing the load.

The summit was followed by a bilateral meeting between US President Joe Biden and Chinese leader Xi Jinping, the first since Biden came into office. Although there were few tangible outcomes, it was a promising meeting after ties between the giants hit near-historic lows earlier this year. While the three-hour meeting revealed serious differences, particularly regarding Taiwan, trade restrictions, and technology transfers, both parties resolved to keep communications open and avoid confrontation.

Climate change

G20 leaders agreed to pursue efforts to limit global temperature rise to 1.5 degrees Celsius, reaffirming their commitment to the 2015 Paris Climate Agreement (Reuters, 2022). The package also increased nations’ efforts to cut greenhouse gas emissions and adapt to the inescapable impacts of climate change, as well as financial, technological, and capacity-building aid to developing countries. The creation of a specific fund for loss and damage was a big step forward, with the issue being placed on the formal agenda and accepted for the first time at COP27. Governments took the historic decision to establish new financial channels and a dedicated fund to help disadvantaged nations in responding to loss and destruction. Governments also agreed to create a “transitional committee” to make recommendations on how to implement the new financing arrangements and finances at COP28 next year. The first meeting of the transitional committee is slated for before the end of March 2023 (United Nations, 2022).

‘The World is on Fire: is Trade a Cure or a Curse?’ explores the linkages between negotiations of trade agreements and climate change, national policies aimed at mitigating the effects of climate change and suggested a set of actions for using trade as a tool for combatting the degradation of the environment.  International Economics CEO Insights September

US midterms and Brazil’s presidential election

The US midterms were a crucial event of the final quarter of 2022. The results and early trends from the just-ended US midterm elections indicate a contested Congress for the remainder of President Biden’s tenure. While the Democrats gained a razor-thin lead in the Senate, Republicans are expected to have a majority in the House of Representatives. The Democrats are in a strong position to promote their legislative objectives to voters in the run-up to the presidential elections in 2024, thanks to Senate control and the lack of a total electoral sweep by the Republicans, as was projected before the midterm elections. Globally, the midterm elections in the United States were expected to have a significant impact on the United States support for Ukraine against Russia. A profoundly divided Congress might jeopardise Washington’s financial and material backing for Ukraine (Mishra, 2022).

Brazil’s presidential election also comes with significant economic implications. Lula Da Silva will be inaugurated as President of Brazil for the third time, on January 1, 2023, ushering in a significant shift in the political trajectory of Latin America’s largest economy. Several firsts emerged during the election. President Jair Bolsonaro became the first candidate to lose his reelection campaign since Brazil’s restoration to democracy in 1989, and it was his first electoral setback in his more-than-three-decade career in politics. It was also the lowest margin of victory in a presidential election and the first time Lula received less than 60% of the vote. In terms of foreign policy agenda under the new presidency, the aspirations can be linked to Lula’s previous tenure as president. During his presidency in the past, he advocated for a multipolar international order, with Brazil taking the lead. He committed substantial time and effort to strengthen international organisations such as the BRICs (Brazil, Russia, India, China, and South Africa) and regional institutions such as Unasur. Brazil is now the world’s third-largest food producer and is a formidable force in the world trading system.

On the other hand, in one of Lula’s speeches, he stated that Brazil is “not interested in the position of a perpetual commodity exporter.” In turn, he promised to prioritise small and medium rural farmers, as they supply the majority of his country’s domestic food supplies. The declaration is a departure from Bolsonaro’s export-focused agriculture strategy, which resulted in two years of record commodity exports for the country as world prices rose. A shift in Brazilian agricultural policy would almost certainly be a drag on global food supplies, perhaps leading to increased market and consumer prices (Monteiro, 2022).

Paul Baker is the founder and chairman of International Economics Consulting Group. He is a consultant for various governments in developed and developing countries, an adviser on global corporate strategies to multinationals, and a Visiting Professor at the College of Europe. Paul is an expert in the Working Group of the World Economic Forum’s (WEF) Digital Flows Initiatives, an Expert in the WEF/WTO’s TradeTech Working Group on trade technologies for trade and is on the Board of the United Nations Economic and Social Commission for Asia Pacific’s Trade Intelligence tools. He is also a member of the UK’s All Party Parliamentary Group on Trade and Investment, and a regular contributor to the UK Parliament’s Trade Select Committee, and UN panels and events regarding trade impact analysis.


Albert, E., 2022. UK economy sliding into recession. [Online] Available at: https://www.lemonde.fr/en/economy/article/2022/11/12/uk-economy-sliding-into-recession_6004028_19.html

Arabian Business, 2022. China’s economy makes major gains in Q3, 2022 with 3.9% jump in GDP to reach $4.32tn. [Online] Available at: https://www.arabianbusiness.com/politics-economics/chinas-economy-makes-major-gains-in-q3-2022-with-3-9-jump-in-gdp-to-reach-4-32tn

British Chambers of Commerce, 2022. BCC Economic Forecast: New PM must act as UK economy set for recession before year end. [Online] Available at: https://www.britishchambers.org.uk/news/2022/09/bcc-economic-forecast-new-pm-must-act-as-uk-economy-set-for-recession-before-year-end

Gopinath, G., 2022. A Disrupted Global Recovery. [Online] Available at: https://www.imf.org/en/Blogs/Articles/2022/01/25/blog-a-disrupted-global-recovery

Gourinchas, P.-O., 2022. Policymakers Need Steady Hand as Storm Clouds Gather Over Global Economy. [Online] Available at: https://www.imf.org/en/Blogs/Articles/2022/10/11/policymakers-need-steady-hand-as-storm-clouds-gather-over-global-economy

IISD, 2022. G20 Leaders’ Summit 2022. [Online] Available at: https://sdg.iisd.org/events/g20-leaders-summit-2022/

IMF, 2022. Rising Caseloads, A Disrupted Recovery, and Higher Inflation. [Online] Available at: https://www.imf.org/en/Publications/WEO/Issues/2022/01/25/world-economic-outlook-update-january-2022

IMF, 2022. World Economic Outlook April 2022, s.l.: international Monetary Fund.

Institute for Government, 2022. Cost of living crisis. [Online] Available at: https://www.instituteforgovernment.org.uk/explainers/cost-living-crisis

International Economics, 2022. Africa’s position on the war in Ukraine. CEO Insights April. Available at: https://www.tradeeconomics.com/russian-invasion-of-ukraine-creates-collateral-damage-in-africa/

International Economics, 2022. MC 12 Results exceed tbhe low thresholds expected. CEO Insights July. Available at: https://www.tradeeconomics.com/mc12-results-exceed-the-low-thresholds-expected/

International Economics, 2022.  The World is on Fire: is Trade a Cure or a Curse? CEO Insights August. Available at: https://www.linkedin.com/pulse/world-fire-trade-cure-curse-trade-economics/

International Economics, 2022.  How will US Trade Restrictions affect the Semiconductor Industry? CEO insights October. Available at: https://www.tradeeconomics.com/how-will-us-trade-restrictions-affect-the-semiconductor-industry/

Jha, P., Notani, S. & Ghei, N., 2022. The WTO’s MC-12: Key outcomes and highlights. [Online] Available at: https://elplaw.in/the-wtos-mc-12-key-outcomes-and-highlights/

Mishra, V., 2022. Key takeaways from the 2022 US midterm elections. [Online] Available at: https://www.orfonline.org/expert-speak/key-takeaways-from-the-2022-us-midterm-elections/

Monteiro, T., 2022. What Does Brazil’s Election Mean For The Global Economy? Some Key Takeaways. [Online] Available at: https://www.investing.com/analysis/what-does-brazils-election-mean-for-the-global-economy-some-key-takeaways-200631741

Reuters, 2022. Key takeaways from the G20 summit in Bali. [Online] Available at: https://www.reuters.com/world/key-takeaways-g20-summit-bali-2022-11-16/

United Nations, 2022. COP27 Reaches Breakthrough Agreement on New “Loss and Damage” Fund for Vulnerable Countries. [Online] Available at: https://unfccc.int/news/cop27-reaches-breakthrough-agreement-on-new-loss-and-damage-fund-for-vulnerable-countries

Wirtschafter, V., 2022. After a victory for democracy, what is Brazil’s road ahead?. [Online] Available at: https://www.brookings.edu/blog/order-from-chaos/2022/11/09/after-a-victory-for-democracy-what-is-brazils-road-ahead/

Woo, R. & Zhang, E., 2022. China Q3 GDP growth tops forecasts but meaningful rebound elusive. [Online] Available at: https://www.reuters.com/world/china/china-q3-gdp-growth-rebounds-faster-pace-risks-loom-2022-10-24/

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