Economic growth is forecast to remain robust at 3.1% in 2022. Consumer spending in value terms has performed well in recent months — better than indicated by underlying sentiment, particularly in Western economies. Positively, this weakening sentiment seems to have been offset so far by a combination of ongoing social welfare measures in advanced economies, rising wages and salaries, increasing debt-financed consumption, particularly in the US, as well as consumers tapping into their savings. In terms of economic sectors, support has come from a recovery in the contact-intensive services sector, as can be seen from the rebound in global tourism activity. Moreover, strong growth in commodity-exporting economies and rising global trade contributed to this trend.
Finally, some strong economic growth trends in 1H22 should be highlighted, which provides a more granular perspective when reviewing global economic developments. Economies like India and the Euro-zone showed a strong growth dynamic in 1H22, compensating very well for the relatively — and likely temporary — weaker performance of the US and China. Looking forward to the coming year, global economic growth in 2023 is again expected to be strong at 3.1%. This matches the average pre-pandemic growth level of around 3.1% between 2009 and 2019. Despite the obvious downside risks, there is also upside potential to the global economic growth forecast. Fiscal measures in the EU and China support growth towards the end of the year and lead to the potential continuation of a stable dynamic in 2023. This fiscal support may at least counter-balance the anticipated downward momentum that some market observers forecast.
Moreover, any resolution to developments in Eastern Europe could have a positive impact on the inflationary dynamic, allowing for less hawkish monetary policy, which in turn could uplift consumer and business sentiment, in addition to triggering a wide range of other positive impacts. However, downward risks still exist. Another important aspect is the strong rise of the US dollar, which is an outcome of considerable monetary tightening efforts by the US Federal Reserve, in combination with uncertainty in the global economy. The strengthening of the US dollar led to rising import costs in non US-dollar denominated economies in 1H22, including major economies like Japan and India.
However, the expectation of a less accentuated rise in the US dollar exchange rate in 2H22 could provide some relief to affected economies in the near term. Oil demand is forecast to remain driven by ongoing global economic growth, especially by the recovery in travel and transportation, which is projected to lead to robust overall growth in oil demand of 3.1 mb/d in 2022 and 2.7 mb/d in 2023, surpassing the pre-COVID-19 levels, to stand at 102.7 mb/d (Graph 2). Given the ongoing high level of uncertainty and increased volatility observed in the markets, OPEC and non-OPEC countries participating in the Declaration of Cooperation (DoC) will continue to monitor market developments and address challenges as well as ensure sustainable market stability.
