Big economies and markets fare well despite Covid but 2022 brings new risks | Nouriel Roubini

The pandemic is not over and the next 12 months pose geopolitical and systemic challenges

Despite dips and disruptions from new variants of Covid-19, 2021 turned out to be a relatively positive year for economies and markets in most parts of the world. Growth rose above its potential after the severe recession of 2020, and financial markets recovered robustly. This was especially the case in the US, where stock markets reached new highs, owing partly to the US Federal Reserve's ultra-loose monetary policy (though central banks in other advanced economies pursued radically accommodative policies of their own).

But 2022 may be more difficult. The pandemic is not over. Omicron may not be as virulent as previous variants - particularly in highly vaccinated advanced economies - but it is much more contagious, which means that hospitalisations and deaths will remain high. The resulting uncertainty and risk aversion will suppress demand and exacerbate supply-chain bottlenecks.