…Global projections getting revised downwards due to supply chain bottlenecks and inflation

The International Monetary Fund (IMF) expects the global economy to reach nearly US$104 trillion in nominal value by the end of 2022.

In fact, surpassing the US$100-trillion mark is a new milestone for global economic output.

Global output last year was valued at US$94 trillion and US$88 trillion in 2020.

Although growth keeps trending upwards, the recovery that was expected in the post-pandemic period is looking strained. This is because of recent conflicts, supply chain bottlenecks, and subsequent inflation.

The IMF had projected global annual GDP growth for 2022 of 4.4 per cent as of January, but this has since been adjusted to 3.6 per cent.

Top 10 largest economies in the world

The United States is still the economic leader worldwide with a GDP of US$25.3 trillion—making up nearly one quarter of the global economy. China follows close behind at US$19.9 trillion.

The frontrunner in Europe is Germany at US$4.3 trillion with the UK coming in second place. One significant change since the last reported figures is that Brazil now cracks the top 10, having surpassed South Korea.

Russia falls just outside, in 11th place, with a GDP of US$1.8 trillion.

While China’s GDP growth has slowed in recent years, projections still indicate that the country will overtake the US by 2030, dethroning the world’s economic leader.

One region also expected to experience growth in the near future is the Middle East and North Africa, thanks to higher oil prices—Iraq and Saudi Arabia in particular are leading this charge. Regional GDP growth in the area is expected to be around five per cent in 2022.

The 10 smallest economies in the World

Some of the world’s smallest economies were hit particularly hard by the pandemic and have subsequently been the most affected by the inflation and food supply shortages resulting from the war in Ukraine.

The smallest economy in the world, measured in the IMF rankings, is Tuvalu at US$66 million. Most of the countries in the bottom 50 are considered low- to middle-income and emerging/developing countries.

According to the World Bank, in developing countries, the level of per capita income in 2022 will be about five per cent below the pre-pandemic trends. Some countries are actually projected to experience negative GDP growth this year, particularly emerging and developing economies in Europe.

For example, Russia is expected to experience a GDP growth rate of -8.5% in 2022, though it still remains to be seen how the cost of war and increasingly harsh global sanctions impact the country’s economic prospects.

Stagflation risks rising

While global economic growth has already been revised downwards, it’s possible the situation could be even more serious. Organisations like the World Bank say that risks of stagflation are rising.

Stagflation, which hasn’t occurred since the 1970s, is defined as an economy that’s experiencing rising inflation combined with a stagnant economic output. Currently, global consumer inflation is currently pegged at seven per cent.

Daily goods are becoming increasingly difficult to purchase and interest rates are on the rise as central banks worldwide try to control the situation. As recent events in Sri Lanka demonstrate, low-income countries are particularly at risk to economic volatility.