BIS Annual Economic Report 2022

No respite

There is no respite for the global economy. Two years ago, it was shaken by the onset of the pandemic, as an overwhelming health crisis turned into an overwhelming economic crisis. While the after-tremors of the pandemic still reverberate, two new shocks hit home in the year under review: the unexpected resurgence of inflation and the tragic war in Ukraine. Last year's Annual Economic Report (AER) raised the prospect of a bumpy pandexit; bumps have turned out to be a one-two punch.

These tumultuous events are bound to have far-reaching consequences. Are we perhaps witnessing a regime change, from a low- to a high-inflation regime? Is the global economy flirting with stagflation? And are we seeing signs of an end to the post-World War II globalisation era? Meanwhile, the crypto universe is in turmoil, reminding us that there are important developments in the monetary system that we cannot neglect.

On the macro front, policy is facing daunting challenges. In some ways, they are not new; but in others, they are unique. As Mark Twain quipped, "History does not repeat itself, but it often rhymes." The world economy experienced stagflation in the 1970s, following a shift away from a low-inflation regime. The new element is that, against the backdrop of historically low interest rates, debt levels – private and public – have never been as high. This is far from inconsequential. Moreover, the monetary and financial system is in the throes of the digital revolution. This, too, albeit in a different way, is far from immaterial.

Our AER tackles these issues head-on. What happened in the year under review? What are the risks ahead? What can policy do? And where is the monetary system heading as the digital revolution proceeds? What vision should guide policy?