Bloomberg Businessweek-Europe Edition January 17, 2022

News flash: The coronavirus isn’t going to be public enemy No. 1 for the global economy in 2022. The biggest dangers this year will stem from inflation and the risk that policymakers will call the post-Covid recovery wrong. This is the year we’ll find out whether the global economy is robust enough to get by with less help from governments and central banks. And whether inflation is a temporary byproduct of Covid or a more persistent problem. When confronted with a wide range of possibilities, forecasters usually settle somewhere in the middle. Among those Bloomberg surveyed, the consensus is that the world economy will expand 4.4% in 2022, after the 5.8% bounceback of 2021. From 2023 onward, most agree, growth will return to its long-term norm of around 3.5%, as if Covid…

For five years, Emmanuel Macron has been fending off challenges from the fringes of French politics. It began in the 2017 election runoff against far-right nationalist Marine Le Pen, continued through a showdown with the yellow vests protest movement, and is culminating in a culture-war clash with ultra-right-wing polemicist Eric Zemmour, who entered the race for the presidency in November. But as he seeks reelection in April, the president who was nurtured in the top echelons of the French technocracy has a potential knockout punch: the robust economy. With polls showing that the French are veering right, Macron regularly gives nods to that part of the electorate. He has praised former President Nicolas Sarkozy for inciting a debate on “national identity,” hired a hard-line interior minister, and gave an interview to…

The most common prediction among political pundits for 2022 is that Democrats will lose control of the House of Representatives in November. The reasons are almost too numerous to list: Inflation is up; voters’ perception of the economy is down; Covid‑19 lingers; President Joe Biden is unpopular; and by a 2-to-1 margin, Americans say the country is on the wrong track. In addition, the president’s party almost always loses seats in midterm elections. These powerful headwinds have both parties believing that House Democrats are most likely doomed. But conventional wisdom sometimes turns out to be wrong. What would it take for Democrats to defy expectations in the fall? Although no one is predicting such an outcome, political handicappers and strategists in both parties can envision plenty of scenarios for how Democrats might…

In a part of the world where stability and predictability are elusive, 2021 ended much the way it started: with surprise reconciliations among regional rivals and the prospect of more. In January 2021, Saudi Crown Prince Mohammed bin Salman invited Sheikh Tamim bin Hamad Al Thani, the Qatari emir, to a Gulf summit, where they signed an agreement ending the three-year-plus boycott of Qatar that the kingdom had led. Ten months later, United Arab Emirates Foreign Minister Sheikh Abdullah bin Zayed Al Nahyan met in Syria with Syrian President Bashar al-Assad, who was until recently a pariah in most of the Arab world. Syria had been suspended from the Arab League in 2011 because of the Assad regime’s violent crackdown on a popular uprising, a conflict that later escalated into a civil…

The world economy bounced back from the Covid-19 slump faster than most forecasters reckoned was possible a year ago—thanks largely to record injections of government money. Now those aid programs are getting trimmed or wound down. What that means for global growth is one of the key questions for 2022. Financial markets are fixated on how fast central banks will raise interest rates to counter surging inflation. But how governments adjust their budgets will likely have a bigger impact on economies than anything monetary authorities do, at least in the developed world. Belt-tightening is under way at various speeds in different parts of the world, and much of it is provisional. The omicron variant could yet upend governments’ plans. In the U.S., President Joe Biden’s proposals to ramp up spending on child care…

In 2021, China managed to stamp out scattered Covid outbreaks while still delivering annual economic growth in the neighborhood of 8%. It helped that, even as the country kept its borders more or less sealed, foreign direct investment and portfolio capital kept rushing in, while exports continued to flow out. Yet as Goldman Sachs noted in a Jan. 5 report, the economic costs of Beijing’s Covid-zero stance “appear to be increasing over time as each new variant is more transmissible than the previous ones.” Omicron is a threat of a different magnitude, even for a population that’s 87% vaccinated, because the China-made shots appear to provide inadequate protection against it. Expect more citywide lockdowns like the one instituted in Xi’an, ametropolis of 13 million residents. These wreak havo conlocal businesses…