The world economy remains on the path of recovery, albeit persistent supply bottlenecks, reported the European Central Bank (ECB).
Also rising commodity prices and the appearance of the Omicron variant of the coronavirus (Covid-19) continue to weigh on short-term growth prospects.
Recent surveys of economic activity suggest that growth momentum remained weak at the beginning of the fourth quarter, particularly in the manufacturing sector due to the aforementioned supply bottlenecks, while the services sector benefited from the reopening of large economies.
Compared with previous projections, the growth prospects for the world economy in the macroeconomic projections prepared by Eurosystem experts for December 2021 have been revised downwards for 2021, have remained unchanged for 2022 and have been revised to hike for 2023.
Thus, the growth of the world economy in real terms (excluding the euro area) is estimated to increase to 6.0% in 2021, before slowing down to 4.5% in 2022, 3.9% in 2023 and 3.7% in 2024.
The ECB also forecasts that the external demand of the euro area will grow 8.9% in 2021, 4.0% in 2022, 4.3% in 2023 and 3.9% in 2024.
However, foreign demand has been revised downward for 2021 and 2022 compared to previous projections. This reflects the adverse impact of continuing supply bottlenecks on global imports.
The ECB expects supply bottlenecks to begin to ease from the second quarter of 2022 and to disappear completely in 2023.
At the same time, the export prices of euro area competitors were revised upward for 2021 and 2022 amid the confluence of higher commodity prices, supply bottlenecks and recovery in demand.
The future course of the pandemic remains the key risk affecting baseline projections for the world economy. Other risks to the growth outlook are seen to be downward, while the balance of risks to global inflation is more uncertain.