Goodbye to 2021’s loose money and hello to 2022’s inflation fighting: Year in Review

Goodbye to 2021’s loose money and hello to 2022’s inflation fighting: Year in Review
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Updated 01 January 2022

Goodbye to 2021’s loose money and hello to 2022’s inflation fighting: Year in Review

Goodbye to 2021’s loose money and hello to 2022’s inflation fighting: Year in Review

LONDON: From the great lockdown, to the great rebound? At the start of this year the world was optimistic that the development of pioneering vaccines would restrict the global spread of COVID-19. December 2020 marked the date when vaccinations for the virus first began to be administered around the world. Since then, the death toll has tripled according to the World Health Organization.
While the vaccine was never going to end the pandemic, the hope was that it would contain its spread, and that global trade and finance could resume unhindered.

Vaccine inspires confidence
However, as vaccine inspired confidence returned during 2021, a surge in demand exacerbated pre-pandemic supply chain disruption. Inflationary pressures in the logistics chain were led by global energy prices. The price of a barrel of Brent crude oil started 2021 at $50 and hit $85 by October.

Energy crisis

More significant was the sharp spike in natural gas prices that month. Europe’s TTF, the benchmark for wholesale gas, hit a record €137 per megawatt hour in October, an increase of more than 75 percent. In Asia, LNG prices soared above the equivalent of more than $320 a barrel of oil.

The gas price rise, particularly in terms of Europe, was exacerbated by a drop in exports from Russia’s Gazprom, partially caused by regulatory problems with its Nord Stream 2 gas pipeline, which is set to double gas supplies to Germany but circumvents Ukraine. Against the backdrop of current geopolitical events between Russian President Vladimir Putin and the West, another gas price spike looks likely to occur in the first quarter of the new year.

Supply chain crunch
Meanwhile, the supply chain crunch brought the system of outsourcing production across the globe and just in time delivery into sharp focus. In March the container vessel Ever Given became the most famous ship since the Titanic when it got stuck in the Suez Canal for six days.
Lloyd’s List estimated the Ever Given held up an estimated $9.6 billion of trade for each day it was stuck. Estimates suggest the stricken vessel knocked up to 0.4 percentage points off global trade growth.

Global inflation
While the sharp rise in global inflation was initially dismissed as transitory and attributed to a temporary mismatch in demand and supply as economies opened up again, price pressures now appear to be more entrenched and will be the unwanted gift from 2021 to 2022.
The other big issue for the world’s economies, particularly gulf oil producers, during 2021 was climate change.

COP26
In August, a UN report warned in stark terms that the world’s governments needed to do more to combat climate change and reduce greenhouse emissions.
Even the International Energy Agency warned investors to stop funding new oil and gas projects to ensure the world reaches net-zero emissions by 2050.
The US and China top the global emissions charts.
However, while US President Joe Biden brought America back into the Paris Climate Agreement, and China agreed to stop financing coal-fired power plants overseas, carbon emissions increased in 2021 as economies bounced back from the first phase of the pandemic.
At November’s critical COP26 UN Climate Conference in Glasgow countries pledged to take steps to address climate change, but intentions fell way short of implementation.
While President Biden warned COP26 of the need to end fossil fuels he also asked OPEC to pump more oil as American gasoline prices jumped to record levels, pushing US wider inflation to 40-year highs. Meanwhile, China ratcheted up its domestic coal production.
COP26 ended with a rather weak pledge to “phase down” coal power and end “inefficient” fossil fuel subsidies.

The SPR effect

Just a few days later, Biden authorized the release of 50 million barrels of oil from the US strategic reserve to his domestic market and vowed to release more to curb energy prices.
Instead of bringing prices down, the release pushed crude higher in the short term.
In short, while support for the 1.5C limit received fresh political backing in 2021, it looks like it will remain out of reach in 2022.
However, climate change continued to impact oil and gas, as environmental, social, and governance issues and other pressures came to bear on the industry, sending investment down by more than a third globally. A report released this week by Rystad Energy also revealed global oil and gas discoveries are on track to hit their lowest full-year level in 75 years if the final weeks of 2021 fail to yield any significant finds.

Capital markets
Another highlight of the global economy this year has been the overall strength of the capital markets despite the pandemic.
In November, in the US, both the Standard and Poor’s 500 and Dow Jones Industrial Average hit all-time highs, as did the tech-heavy NASDAQ. Rising oil prices and mining stocks have also pushed the blue chip FSTE 100 higher this year. The sharp rise in oil prices also boosted Saudi Arabia’s Tadawul All Share Index, which rose more than a third this year. The Kingdom’s strong showing also boosted the wider MSCI GCC Countries Index. The index, which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, increased by a similar amount over the year.
Strong equity markets were key to global mergers and acquisitions, which hit a record high in 2021, topping $5 trillion for the first time ever. M&A volumes soared 63 percent to $5.6 trillion by 16 December, according to a report by Dealogic, way above the pre-credit crunch crisis record of $4.4 trillion in 2007.
The increase was driven partly by pent-up demand from last year when the pace of M&A activity fell to a three-year low.

Crypto market
And 2021 was also the year the crypto market came of age. After a roller-coaster year, the total value of cryptocurrencies rose to $3 trillion last month, led by Bitcoin.
Looking forward to 2022, pandemic fueled easy money policy, the salient feature of the global economic support in 2021, is finally set to end in 2022.
The economic outlook is now dominated by the impact of inflationary pressures and increasingly tighter monetary policy as well as uncertainty around omicron, all of which could set back economic recoveries worldwide.
Central banks, most notably the Federal Reserve and the Bank of England have signalled persistent elevated inflationary pressures will lead to higher interest rates in the coming year. The Bank of England recently hiked its benchmark interest rate from 0.1 percent to 0.25 percent. The US Fed has indicated it is aiming for three rate hikes next year. The European Central Bank is also shifting to a tighter policy, albeit more gradually.

Inflation
US inflation is currently running at 6.8 percent, across the eurozone it is almost 5 percent. In Germany, Europe’s largest economy, it is 6 percent, and in the UK 5 percent.
Central banks are set to slash debt purchases next year by an estimated $2 trillion across the four big advanced economies. JPMorgan estimates central bank bond demand across the US, the UK, Japan, and the eurozone will fall by $2 trillion in 2022, following a $1.7 trillion reduction during 2020.
That retrenchment is necessary after an International Monetary Fund report released this month noted that 2020 saw the largest one-year debt surge since the Second World War, with the total rising to $226 trillion. Borrowing by governments accounted for more than half of that figure. 

The IMF report reveals global debt increased 28 percent to 256 percent of world output.
The starker figure though, against the backdrop of tighter monetary policy, is the increase in private debt, which accounts for 178 percent of global gross domestic product. As interest rates climb, global debt defaults could increase next year, particularly as both the rise of the omicron COVID-19 variant, as well as the Delta variant identified last summer, have already seen governments across the world impose fresh restrictions on economic activity.
Against that backdrop, the odds on another lockdown and delayed rebound are getting shorter by the day.
Berenberg chief economist Holger Schmieding now expects a 1 percent quarterly drop in eurozone and UK GDP in the first quarter of 2022, downwardly revising earlier growth predictions.
Suddenly, this year’s bullish growth projections of a global recovery made by the IMF of 5.9 percent this year, and 4.9 percent in 2022, are starting to look very optimistic.


World needs to invest $3trn-plus in renewables in 10 years: UAE minister

World needs to invest $3trn-plus in renewables in 10 years: UAE minister
Image: Shutterstock
Updated 9 sec ago

World needs to invest $3trn-plus in renewables in 10 years: UAE minister

World needs to invest $3trn-plus in renewables in 10 years: UAE minister

The world needs to invest at least $3 trillion in renewable energy in the next 10 years, state news agency WAM quoted United Arab Emirates (UAE) Industry Minister Sultan al-Jaber as saying on Tuesday in Dubai.

The minister, who is also the Abu Dhabi National Oil Company (ADNOC) chief executive, added that the UAE remains committed to providing reliable supplies of oil and gas with less carbon emissions.

The minister was attending a session at Abu Dhabi Sustainability Week Summit at the Expo 2020 site in Dubai.


France sees fourfold jump in rooftop solar installations: NRG matters

France sees fourfold jump in rooftop solar installations: NRG matters
Updated 2 min 46 sec ago

France sees fourfold jump in rooftop solar installations: NRG matters

France sees fourfold jump in rooftop solar installations: NRG matters

RIYADH: As Europe continues to fight soaring energy costs and pursue transition to cleaner fuel sources, countries such as China are either curbing electricity shortages or investing in green energy.

Looking at the bigger picture:

European power costs for February are forecast to decline as favorable weather conditions are set to boost renewable energy output via wind power generation, Bloomberg reported.

This fall in power prices is expected to ease the pain of rallying energy prices on households and small businesses across the continent.

France recorded a fourfold increase in new rooftop solar installations last year as demand for solar panels and extra insulation in Europe surged. The drive has been sparked by people attempting to curb soaring energy bills, Bloomberg reported, citing Rystad, an energy research and business intelligence firm.

Additionally, governments of EU members such as Italy and Spain dedicated $13.7 billion and $3.9 billion respectively to enhance energy efficiency in households up until 2026, Bloomberg reported, citing figures from the Bruegel think tank.

China’s record coal spree, which pushed annual production in 2021 to over four billion tons, is capable of averting energy supply crisis and electricity shortages, according to Bloomberg.

This comes as the country has secured enough fuel supply to cater to local needs.

Through a micro lens:

Chinese state-owned power firm China Three Gorges Corporation is set to spend $6.5 billion on three off-shore wind farms in the Guangdong province amid a scheme to diversify its portfolio, the Financial Times reported.

While the hydropower giant has a current capacity to generate up to 26 gigawatts of electricity from solar panels and wind turbines, it aims to push this figure to 70 or 80 gigawatts by 2025, according to Bloomberg.

Belgium based metal supplier Eurometaux has turned to EU policymakers for help as it seeks the support of member states in boosting local productions of aluminium, zinc, and silicon amid energy transition efforts, Reuters reported.

This comes in line with the Union’s 2050 net zero plans which include electric vehicles requiring aluminum as well as renewable energy that call for zinc and silicon.


Australia’s consumers’ sentiment drops slightly despite omicron worries

Australia’s consumers’ sentiment drops slightly despite omicron worries
Updated 19 min 35 sec ago

Australia’s consumers’ sentiment drops slightly despite omicron worries

Australia’s consumers’ sentiment drops slightly despite omicron worries

Australian consumers appear to have fewer concerns over the omicron variant compared to other COVID-19 strains, according to a recent report by an Australian bank.

Australia’s Westpac-Melbourne Institute Index of Consumer Sentiment went down by only 2 percent in January, in what was deemed as a “surprisingly solid” result.

The delta variant prompted a higher 5.2 percent drop during the first month of its spread. 

The latest result was also much lower than the 17.7 percent slump experienced when the pandemic started, according to a report by Westpac.

The January decline in the index was attributed to worries about the economy and family finance’s outlook for the next 12 months, which decreased by 9.6 percent and 2.8 percent, respectively.

This is despite a noticeable improvement in actual family finances relative to a year ago, with its sub-index rising by 7.5 percent in January, the bank said.

Looking at the state breakdown, the data showed that Queensland, Western Australia and South Australia all faced worsening sentiment. On the other hand, confidence brightened in New South Wales and Victoria.

The report added that consumers who lived in states that were previously affected by the delta variant lockdowns were less worried about the omicron outbreak when compared to citizens of states who are facing their first major wave of the pandemic.


German thyssenkrupp plans to double its sales in Egypt to $113m

German thyssenkrupp plans to double its sales in Egypt to $113m
© thyssenkrupp AG, https://www.thyssenkrupp.com
Updated 21 min 14 sec ago

German thyssenkrupp plans to double its sales in Egypt to $113m

German thyssenkrupp plans to double its sales in Egypt to $113m
  • Doubling the expected business volume will come from the group’s expansion in the establishment of industrial complexes

German multinational conglomerate thyssenkrupp plans to double its unit sales in Egypt to $113 million (100 million euros) within the next two years, Al-sharq reported, citing Andreas Beckers, head of Egypt’s unit.

The company, which focuses on industrial engineering and steel production, saw sales in the Egyptian market of between 40 and 50 million euros in 2021.

Doubling the expected business volume will come from the group’s expansion in the establishment of industrial complexes, either alone or through the existing partnership with the Nasr Company for Intermediate Chemicals in Ain Sokhna area, Becker added.

Thyssenkrupp is in talks with a number of Egyptian companies such as Orascom Construction and Industry, as well as state petrochemical companies, to set up green fertilizer plants

In addition, the corporation’s parent company is interested in investing in the Saudi city of "NEOM", as it includes many opportunities, especially in the renewable energy sector, Becky revealed.

Announced in 2017, the “NEOM” city project aims to develop and diversify the economy of the world's largest oil exporter, in line with "Vision 2030”.


Saudi Arabia discovers 3,000 industrial minerals in the Arabian shield: Director of SGS

Saudi Arabia discovers 3,000 industrial minerals in the Arabian shield: Director of SGS
Updated 53 min 36 sec ago

Saudi Arabia discovers 3,000 industrial minerals in the Arabian shield: Director of SGS

Saudi Arabia discovers 3,000 industrial minerals in the Arabian shield: Director of SGS

RIYADH: Saudi Arabia’s search of mineral resources is continuing in the Arabian shield in the west part of the Kingdom, where 3000 mineral occurrences have already been discovered.

The Arabian shield covers an area of 600,000 km2, which the Saudi Geological Survey, aims to survey for mineral occurrences, according to the senior director of the Survey and Exploration Centre at SGS.

Among the 2,361 metallic minerals discovered in the Arabian shield are copper and zinc, with more set to follow as per the SGS strategy.

“The total of minerals is about 5,535 mineral occurrences in Saudi Arabia,” Abdullah Nabhan told Arab News on the sidewalk of the Future Mineral Forum, FMF.