2022 outlook: Goldilocks but with two bears looming

Our base case for the global economy assumes ongoing growth and an expansion of the recovery into developing countries. The collapse of global demand, which we foresaw in our outlook last year, was met with an unprecedented and forceful response by policymakers. So, while the crisis was different this time, the policy response that followed took a page out of the central banks’ approach to the 2008 global financial crisis. What took the response further was the unprecedented fiscal support, in scope and size. In many developed nations, generous direct transfers from governments to households occurred at near-record pace. The strength and speed of policy, along with rapid vaccination, allowed the global economy to reopen and recover quickly from a very deep, yet short recession.

Consequently, 2021 turned out to be the year of recovery, and our outlook on the world economy for 2022 is one of growth, albeit at a slower pace. Absent a new growth impulse (e.g., emergency stimulu