Consumer spending of built-up savings during the Covid-19 pandemic could contribute an additional three percentage points to global gross domestic product growth in 2022, according to Mastercard.
If those savings are used quickly, that growth could be closer to a 4.5 percentage points boost to the GDP, according to research on Thursday by the Mastercard Economics Institute, which was launched in 2020 to analyse macroeconomic trends.
Household saving rates nearly doubled in 2021 compared with before the pandemic and how quickly or slowly consumers spend from their savings will have a ripple effect on the global economy, the agency said in a report.
Excess savings in the UAE are expected to reach about Dh295 billion ($80.3bn) next year, the payments company said.
Savings and spending, supply chains, digital acceleration, global travel and a growing list of economic risks will continue to shape the global economy in 2022, the Mastercard Economics Institute said in its global economic outlook for 2022.
“The past year was not the return to normal that many yearned for, but collectively, we have made tremendous progress,” said Bricklin Dwyer, Mastercard chief economist and head of the Mastercard Economics Institute.
“Globally, economic growth, vaccine advances and digital transformations that have made businesses large and small more resilient, continue to shape the future. It is against this backdrop that we anticipate consumer demand – and spending power – to grow and the experience economy to re-emerge next year.”
The global economy has bounced back strongly from the pandemic-driven slowdown that last year tipped it into its worst recession since the 1930s. However, the pace of recovery has remained uneven amid a surge in different Covid-19 variants and slower rate of vaccinations, especially across some developing countries.
Mastercard chief economist and head of the Mastercard Economics Institute
The pandemic sparked spending growth on goods from 39 per cent to around 47 per cent at its peak, roiling the services economy while burdening supply chains, according to Mastercard.
“As the demand and flow of goods normalise, we expect supply tensions to ease and price pressures to fade over the course of 2022,” Mastercard said in its 2022 outlook report.
Meanwhile, 20 per cent of the digital shift to e-commerce has stuck permanently for the retail sector, the company said.
“The big question as we head into 2022 will be how the composition of online spend settles following the unwind in savings and fade in fiscal support,” said the report.
The UAE’s online share of spend in the retail sector is on par with the pre-pandemic trend.
Nearly 88 per cent of countries also recorded a surge in the subscription of things in 2021 compared with the previous year, according to Mastercard’s analysis across 32 markets.
Meanwhile, leisure travel recovery continued as international travel opened up, with medium- and long-haul flights set to gain ground in 2022, Mastercard said. Continued growth hinges on containing virus variants that drive travel bans.
“We saw a swift rebound in domestic and short-haul international travel [less than 1,000 kilometres], medium-haul travel [under 2,900km] lifted by fewer restrictions, while long-haul travel trails behind,” as per the Mastercard outlook.
In the UAE, domestic trips have reached around 18 per cent of pre-pandemic levels, with international short, medium and long-haul trips at 80 per cent, 30 per cent and 112 per cent respectively, the company said.
Risks remain with the potential to disrupt the global economy, Mastercard said, citing inflation, supply chain pressures and reduced government stimulus.
“New Covid variants like Omicron pose the biggest immediate risk, but we’re keeping an eye on nearly a dozen additional risks that have the potential to derail recovery, including a sharp recalibration of global housing prices that have appreciated 66 per cent over the past two years, a surge in oil prices, fiscal cliffs in advanced economies and international tariff wars,” the report said.
