The easing of the effects of the pandemic thanks to the success of the vaccination campaigns, especially in developed economies, as well as government-supported financial incentive programs, were effective in the economic growth to reach pre-pandemic levels in 2021. The total government-sponsored financial stimulus programs provided reached 29 percent of GDP from the start of the pandemic to November 2021. Comparatively, incentives provided after the 2008 global crisis were at the level of 3.3 percent of the GDP.3

However, the economic recovery showed significant differences across countries and industries. Secondly, although employment and working hours have yet to return to normal levels in some industries, serious employment issues have been observed. Third, the persistent gap between supply and demand for some commodities, coupled with rising food and energy costs, has resulted in higher-than-expected and prolonged price increases.4

As the year 2021 come to an end, high inflation has become one of the most important issues globally, and there has been significant uncertainty about how the central banks will react. As of December 2021, 12-month inflation rates were measured above 5 percent in 15 of 34 countries classified as developed economies by the IMF. By modern standards, such a sudden and nationwide jump in inflation has not been recorded for more than 20 years. This increase in inflation was not limited to developed economies; emerging and developing economies (78 of the 109 countries classified as such) also faced annual inflation of more than 5 percent.5 According to the World Bank’s Global Economic Outlook, one of the most important issues affecting developed and developing economies has been the problems encountered in global supply chains due to the economic slowdown in the last two years. Transport costs have risen sharply. Unlike the oil-related supply crisis of the 1970s, the COVID-19-related supply crisis has brought more uncertainty as it depicts a more diverse and opaque picture.

In 2021, energy prices included in the S&P Goldman Sachs Commodity Index (GSCI) rose 59 percent. The price increases stemmed from the economic recovery seen with the easing of the pandemic. By comparison, for most other commodities within the GSCI, the increase was around 20 percent.6

At the beginning of 2021, Evergrande, one of China’s largest real estate companies, tumbled into a debt restructuring process with the Chinese government, after the financial crisis and announcing that it could not repay its debt of approximately 300 billion dollars to its foreign investors.7 However, the crisis does not seem to be over.

While Chinese real estate developers’ offshore debts in dollar terms in the last quarter of 2021 are at the level of 10.2 billion dollars, their debts for the first quarter of 2022 are almost double this, at the level of 19.8 billion dollars. This debt burden, which has caused Evergrande to default, highlights the threat of default by other developers such as Kaisa.8

China has invested heavily in real estate projects for many years. However, in 2021, the declines in home sales and new construction by 16 percent and 21 percent respectively, indicate that the good days are over.

Despite the IMF’s forecast in January 2022 that the world economy will grow by 4.4 percent in 20229, political risks arising with the Russian occupation of Ukraine at the end of February caused serious uncertainty in the economy, including the financial markets.10 The possible effects of the sanctions against Russia, posed especially by the USA and the European Union, on the global economy, including the removal of Russia from the SWIFT system, are yet to be known. However, considering that 41 percent of Europe’s natural gas needs and 25 percent of its oil needs are supplied from Russia, it is predicted that the increase in energy prices will continue.11