The state of the economy is constantly changing.
We are all now facing new economic trends that are likely to define the post-Covid era. Economic issues such as inflation are global. But there are several other key economic changes that will continue to affect the majority of the population.
In this article, we will go over the 5 economic issues that affect most people.
Among all the issues that the world is faced with, the IMF identifies inflation and uncertainty as serious challenges.
Uncertainty is perhaps the final result of all the economic issues put together. Inflation on its own is a big challenge. But corresponding issues like the cost-of-living crisis and geopolitical uncertainty weighing on supply chains exasperate the problem.
Governments, central banks, and other institutions are being faced with the challenge of restoring price stability.
For most people, this trend of uncertainty will affect every aspect of public and private finances. Public institutions will have to grapple with implementing structural reforms that ease the cost of living pressures and offset productivity and supply constraints.
As of October 2022, global growth is projected to slow from 6% (2021) down to 3.2% for the financial year of 2022.
Growth is then projected to slow to 2.7% in 2023.
Overall, these are the worst growth projections produced since 2001.
When economic growth is slow, the risk of a recession increases. At the same time, inflation rates tend to fall. Ultimately, slow growth will continue to contribute to the economic uncertainty we are all facing.
Inflation is cited by the IMF as of the primary causes of economic uncertainty, cost-of-living pressures, and slowing growth.
Projected to rise from an already-high 4.7% in 2021 to 8.8% in 2022, inflation is on the rise globally. However, it is projected to then decline in subsequent years, dropping down to 4.1% in 2024.
Inflation has a negative effect on consumers’ purchasing power and is by far the most significant typical effect inflation has on ordinary people. A fixed sum of money continues to decline in value, meaning people can afford less for the same amount of money.
Because wage growth has not been keeping up with inflation, many people will face personal budget constraints. Disproportionately affected are the poor, which means social mobility is negatively affected as well.
Risks to supply chains have materialized throughout 2022.
Downturns in Russia and China have led to global output contracting. At the same time, consumers in the world’s largest economy, the US, have been spending less than expected.
It is already being dubbed the “2021-2022 Global Supply Chain Crisis”, something you will probably see referred to in economic history in the future.
This economic issue started with Covid, as workers became sick and mandates slowed shipping throughout the globe. This and more current developments affect the availability and prices of many consumer products you can find in all the stores in your neighborhood.
The war in Ukraine has also had a major impact on the already-existing crisis. Globally, Ukraine and Russia together account for about:
o 30% of platinum
o 16% of iron and steel
o 5.5% of aluminum
o 11% of nickel
o 13% of titanium
We could easily go on and on, as the two warring countries account for many other crucial resources in the global supply chain as well. Should the war continue to drag on, supply chain woes will certainly get worse.
What this means for most people are shortages and corresponding price increases. Like most economic issues listed (and most economic issues in general), this feeds directly into other problems, especially inflation. To illustrate the point, consider the 2022 US shortages of infant formula and tampons.
While this isn’t news that is exactly “good” or “bad”, the response to these issues is expected to be an increase in concise fiscal support.
As the poor are the most vulnerable to these economic trends, the IMF recommends targeted support that eases the financial burden poor citizens everywhere are facing. The worry is that delays in taking action will make the problem worse and further slow the global recovery.
We hate to be the bearers of bad news, but the IMF, World Economic Forum, and other institutions are all united in their projections of economic trends pointing much more toward the downside.
Challenging for most consumers will be rising costs for basic goods.
Tighter and stricter budgeting is the first line of defense, but increased income, whether through a second job or a side gig, can also help you make it through these difficult economic times.