Kukgeum Center "Global Economy to Grow 4.7% Next Year... Debt and US Tapering Risks"

'2022 World Economy and International Finance Key Issues and Outlook' Seminar

[Asia Economy Reporter Jang Sehee] The International Financial Center forecasted that the global economic growth rate will reach 4.7% next year. This is 1.3 percentage points lower than this year's 6.0%. Additionally, the Federal Reserve's (Fed) tapering and the surge in debt are expected to act as risks.

On the 28th, the International Financial Center held a briefing titled 'Key Issues and Outlook for the Global Economy and International Finance in 2022' at the Bankers Hall in Jung-gu, Seoul, where it announced these projections.

The Center predicted that the service sector and employment market will recover due to vaccine distribution and the normalization of economic activities. It also mentioned the rebound in emerging markets' growth as a positive factor.

Major risks to the global economy next year include the Fed's tapering, high debt burdens, overheating asset markets, and intensified US-China conflicts. In particular, high debt and inflation are expected to constrain growth recovery.

During the pandemic, emerging countries saw government debt surge by 8.6% relative to their gross domestic product (GDP), limiting fiscal stimulus capacity. Moreover, inflationary pressures and the Fed's tapering initiation may reduce liquidity.

The international financial market next year is expected to experience increased volatility during the policy normalization process. Global stock prices will face greater adjustment pressures, and major countries' interest rates are expected to gradually rise due to expectations of policy rate hikes and inflation risks. The foreign exchange market is forecasted to show a strong US dollar.

Choi Jaeyoung, Director of the International Financial Center, stated in his opening remarks, "Next year, the global economy is expected to slow down compared to this year but maintain solid growth compared to previous years."

He added, "Overall adjustment pressures such as the Fed's reduction of asset purchases and rising long-term interest rates are increasing," and "Risks hidden by abundant liquidity may become apparent."