Threats to the world Economy

 Owing to ongoing turbulence from the Covid-19 pandemic, the global economy made the transition from recovery to expansion 2021. An uneven economic expansion generated supply and demand imbalances, leading to major supply chain disruptions and rising inflation.

Various international institutions and economists have made their depiction for the upcoming year. Almost all of them are unison to identify the following challenges to the world economy as:

1- Omicron and more lock-downs

The first is the new Corona virus variant omicron and new closure decisions. Excessive restrictions, quarantines and complete closures at the border gates at many European countries appeared with the first patient expired in UK due to the variant. Many European countries especially France, started to talk about returning to remote working conditions for two or three days a week. In the surveys conducted by many European countries even after the pandemic is over, people will demand to continue remote work. However, in the case of school closures and strict quarantine decisions, again this meas the loss of income in the service sector which is a risk that would highly constrain world economy, growth,employment and public finance.

2- The Consumer price index 

High global inflation risk is expected to continue until the mid spring of next year is another critical phenomena. It is estimated that consumer price index (CPI) will reach 7% at the end of 2021 and will maintain it till April. So, the global inflation risk due to global commodity, agriculture and food, energy prices and logistics costs poses a significant problem.

                               

3- Supply Chain Bottleneck 

In 2021, supply chain disruptions have played a key role in stalling global recovery in 2021. Shipping along with a shortage of shipping containers, and a steep rebound in demand once pandemic related restrictions were eased, have left producers scampering for components and raw materials. The auto sector remains the worst hit, with production euro-zone. Car makers have cut production as intermediate equipment, especially semiconductors remain in short supply. Experts expect the supply bottlenecks to continue weighing on growth well into next year.

4-  Soaring inflation

A major threat to economy is soaring inflation worldwide. The shortage of raw material and input along with higher energy prices have pushed inflation in the euro-zone and the United States to multiyear highs. The European central bank has maintained that prices have been pushed up by temporary factors such as supply shortages, higher energy prices and base effects of global demand-supply imbalances subside

5- The fiscal policy

Another major factor of threatening economy is the narrowing of the fiscal policy of countries. Many leading countries have to shrink their budget deficit and slow the increase in public debt in 2022. This affect the growth performance, employment and public social support opportunities of country. Fiscal issues like energy subsidies, transparency evaluations, fiscal analysis of resource industries, public investment management and revenue administration fiscal information tool are still needs to be addressed. The dire need of time is to strengthen the credibility of fiscal policy to support public in their best interest.