As the coronavirus pandemic enters its third year, five fundamental factors -- savings and spending, supply chains, digital acceleration, travel, and a growing list of economic risks -- will continue to shape the global economy, according to the Mastercard Economics Institute.
Shifts in household savings, economic growth, a leisure travel recovery, and consumer spending on "stuff" versus "experiences" are all in focus as businesses continue to become more digital, the affiliate of the global payments company says in its Economy 2022 report.
"Households have been saving more than they typically do as they have paid down debt, invested, or just put the money in the bank. How quickly consumers return to old saving habits is critical for understanding the growth outlook," the report notes. Among its key findings:
Travel: An uptick is foreseen in the leisure travel recovery as international travel opens up, with medium- and long-haul flights to gain ground in 2022. While travel restrictions contributed to the slow rate of recovery across the region in 2021, with only a few markets in Asia Pacific witnessing a rebound in domestic travel -- such as Australia, where trips returned to nearly 69% of pre-pandemic levels -- the view for 2022 is optimistic across the region.
Savings & Spending: Excess savings in the developed economies of Asia Pacific are a source of strength in consumption in 2022 and beyond. A faster scenario for spending excess savings would mean a two-percentage-point acceleration in consumer spending growth for several markets in 2022, including Australia, New Zealand, Japan and South Korea. Globally, consumer spending of built-up savings could contribute an additional three percentage points to global GDP growth in 2022 as pandemic restrictions ease.
To read the interactive Economy 2022 report online, scan the QR code
Digital: 20% of the digital shift in retail will stay put -- reshaping how and what consumers buy. E-commerce subscriptions gained traction in 2021 as nearly 88% of countries across 32 markets saw a surge in subscription services compared to the previous year -- on average, the retail subscription share of total spending increased by a factor of 1.25 from 2020 to 2021 across six Asia Pacific markets. Notably, car companies, virtual workout partners, bike rentals and pet services are among several businesses benefitting from this model.
Supply Chains: Household spending on services in Asia is expected to accelerate while goods demand also stays robust in 2022. While supply chain disruptions continue to linger on, prolonging high logistics costs and a surge in global commodity prices, exports remain a major positive factor for the region.
Risks: Risks remain with the potential to disrupt the global economy. New Covid variants like Omicron pose the biggest immediate risk, however there are identified additional risks that have the potential to derail recovery, including a sharp recalibration of housing prices, a surge in oil prices, and fiscal cliffs in advanced economies.
"Although the past year remained shrouded in uncertainty, we are optimistic about the year ahead, and expect 2022 to be the year of travel recovery for Asia," said David Mann, chief economist for Mastercard in Asia Pacific, the Middle East and Africa.
"While the recovery trend across the region may be non-linear, we anticipate pent-up demand and savings will finally be released by consumers, evidenced by the recovery of 'out-and-about' categories such as apparel and beauty."
