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Home > Reports > Annual Report 2021 > Strategic Report > Business Environment In 2021 And Outlook For 2022

Business Environment In 2021


The global economy made the transition from recovery to expansion during 2021 as a result of strong consumer spending, robust exports, improving business investment and governments’ stimulus packages. This transition took place despite ongoing uncertainty from COVID-19, supply chain bottlenecks and inflation. Pent-up demand and ravaged supply chains created supply/demand imbalances, leading to major supply chain disruptions and rising inflation. Inflation accelerated to its fastest pace since the 1980s mainly in North America and Europe, driven mostly by the cost of energy, vehicles, and food.


Advanced economies and emerging markets rebounded sharply during 2021 despite the negative impacts of COVID-19, inflation, supply chain disruptions and weather-related factors. 2021 saw many emerging markets recovering from the Delta variant, and relaxed containment measures led to a spike in consumption. Support also came from exports as advanced economies’ demand for emerging markets products recovered. High commodity prices and strong exports contributed to emerging markets’ robust growth rates.


North America and Europe enjoyed robust consumer-led growth during 2021, despite the challenging environment. With demand recovering faster than supply, inflation has surged in these two regions. Asia also saw a rebound led by China despite the Chinese government’s zero-COVID-19 policy, which continued to restrict service sector activities and consumer demand. The property sector in China continued to struggle as Beijing remains committed to reduce excess leverage. Industrial sector activities were negatively impacted by the housing construction downturn and the effects of China’s forceful decarbonization campaign on energy consumption. Commodity exports were a bright spot in African and Latin American economies as they enjoyed high prices and resilient demand from North America, Europe, and Asia. GDP growth in both regions stemmed largely from this increased value of exports, though lack of government support in Africa led to lower than expected rebounds in GDPs.


Global industrial production rebounded sharply during 2021 after the 2020 plunge. Pent-up consumer demand, backed by substantial savings and government stimulus packages introduced during the pandemic, helped global industrial production regain momentum and bounce back to pre-crisis growth rate levels.


Feedstock prices hit multi-year highs during 2021, driven by strong recovery in demand, effective OPEC supply control, weather-related supply issues in the US, and geopolitical factors, and compounded by market expectations of relatively tight supply. The natural gas crisis in the second half of the year also drove up feedstock prices, with production struggling to catch-up with the unexpected rise in demand from China due to less coal availability. Competition between China and the EU for LNG shipments also led to prices increasing by 4 to 5 times.

Outlook For 2022


In 2022, businesses will have to contend with the consequences of governments’ shifts from fiscal policy stimulus to restraint, rising interest rates and tightening credit conditions, and major economies’ energy transitions from hydrocarbons to renewables. Amid these transitions, global economic growth is expected to stabilize in 2022. Geopolitical conflicts, such as an escalation of tensions between the US and China or Iran or between NATO and Russia, will continue to pose risks to the outlook. New COVID-19 strains are not expected to derail the recovery but the pace of growth is expected to decelerate slightly. Inflation is expected to ease during 2022 as agricultural and industrial commodity prices retreat and pent-up demand is satisfied. However, this could be a slow process because logistics bottlenecks and supply shortages will take time to resolve. Monetary and fiscal policy tightening is also expected to control inflation by restraining demand growth.


Growth in advanced economies and emerging markets is expected to stabilize in 2022 from a significantly above-trend pace to a modestly above-trend rate as a result of withdrawal of monetary accommodation, and satisfaction of pent-up demand. The easing of labor and supply shortages is expected to support continued expansion in 2022. Containment measures prompted by new strains and increased risk aversion might hinder economic expansion, and prolonged supply chain disruptions threaten to extend the upward pressure on consumer price inflation rates for goods. Monetary policy tightening to fight inflation will have negative impacts on consumption and credit availability. If inflation continues, it will erode the purchasing power of salaries, limiting consumption. Lower demand for commodities from advanced economies is expected to suppress the growth rate of emerging markets.


Growth in North America and Europe is expected to stabilize in 2022 from a significantly above- trend pace to a modestly above-trend rate as stimulus packages are withdrawn and pent-up demand is satisfied. Growth in Asia is also expected to stabilize. China’s firm COVID-19 policy, the continuation of the property sector deleveraging, and increasing intervention in the private sector is expected to lead to lower growth in China. Latin American and African growth is expected to be negatively impacted by lower demand for their commodities from North America, Europe and Asia.


Global industrial production is expected to stabilize during 2022 supported by increasing vaccine coverage curbing the spread of COVID-19. However, it faces a major challenge, which is the slow improvement of the global supply chain.


A limited retreat of feedstock prices is expected as US shale gas production increases, but, in general, prices are expected to remain at elevated levels compared to previous years due to strong global demand, low inventories and tight supply in addition to geopolitics.

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