Return of economic growth and inflation in the United States and the Eurozone, record financial markets, economic crisis in Lebanon, COP 26, signing of a global agreement on the taxation of multinationals… The year 2021 was rich in economic events! Here’s our pick of the top ten economic news stories from the past year.
1. The return of economic growth
After a year marked by an unprecedented global economic crisis in 2020, 2021 was marked by an economic recovery. The return to economic growth has been gradual and uneven across the different regions of the world. For example, the eurozone emerged from the recession from the second quarter of 2021 and experienced a weaker economic recovery than in the United States. China – one of the few countries with positive growth in 2020 – meanwhile has seen weaker growth than in the past decade. In France, economic growth should exceed 6% during the year, unparalleled growth since the late 1960s † However, this record must be seen in the specific context of the health crisis: France has only regained the level of economic activity it had at the end of 2019…
2. Pursuing a cyclical economic policy
During the year 2021, the implementation of cyclical economic policiesboth fiscal and monetary, intended to mitigate the effects of the economic crisis related to Covid-19, continued.
Concerning the political budgetcan we keep in particular the massive stimulus package passed by the US Congress in March, as well as the presentation of the Investment plan France 2030 in October, aimed at stimulating innovation and strengthening the competitiveness of companies in France. As a result of this budget support, the amount of government debt has increased† In France, where it is half owned by non-residents, the public debt now stands at almost €2.674 billion, or 116.4% of GDP. It should remain at this level for the next five years, which posed no sustainability issues as long as interest rates remained low.
Indeed, with regard to the monetary policy, central banks continued to support the economy with particularly low interest rates, even negative for the European Central Bank (ECB), and securities purchase programs. Over the summer, the ECB announced a review of its strategy, in particular by a medium-term inflation target of 2%, suggesting that the central bank may allow price increases to temporarily rise above this target, to offset a previous period of inflation below 2%. Finally, the context of the return of inflation in the United States and the eurozone could encourage the Federal Reserve (FED) and the ECB to restrict their monetary policy In the next months.
3. The Return of Inflation
2021 is also the year of return of inflation in the United States and the Eurozone† While these two economic regions have experienced an average annual increase in the general price level of 2.1% and 1.7% respectively between 2000 and 2020, inflation has started to rise again to 6.8% year-on-year in the United States and 4.9% in the eurozone in November 2021. Main explanatory factor for this return to inflation: thean increase in energy pricessuch as oil or natural gas.
However, this return to inflation does not affect all developed countries. The main exception in this regard is Japan.where prices continue to stagnate.
4. The record levels of the financial markets
In France, as in the United States, the stock markets reached last Novemberrecord highs. The CAC 40, the flagship index of the Paris stock exchange, thus crossed the 7,000 point mark for the first time in its history. Boosted by the economic recovery and the prospect of future earnings, this performance is largely explained by: the abundance of cash on a global scale, accentuated by the Expansionary monetary policy conducted by central banks†
5. COP 26 and Climate Issues
The 26th Conference of the Parties, or COP 26, was held in Glasgow last November. The challenges were simple: to conduct a first assessment of the Paris Agreement, adopted at COP 21 in 2015, and to strengthen international cooperation, in particular to limit global warming to +1.5°C. COP 26 allowed some progress, in particular on the fight against deforestation, the phasing out of coal or carbon neutralitybut proved insufficient to hope to limit global warming to +1.5°C.
6. A more intensely felt poverty in France
Even before the outbreak of the economic crisis related to Covid-19, almost one in five French people was confronted with a situation of poverty or material and social deprivation† While the exact impact of the 2020 recession is not yet known, it seems that poverty has been felt and exacerbated more intensely over the past year, as evidenced by the sharp increase in the number of people relying on food aid.
7. Stagnation in unemployment, but an increase in the number of job seekers
This is one of the paradoxes of 2021: during the year, unemployment in France returned to pre-crisis levels. The unemployment rate stands at 8.1% of the labor force, as in the fourth quarter of 2019. This paradox is partly explained by the implementation of measures to support employment and the economic recovery. However, this relatively good news should not overshadow the deterioration in a number of other indicators, most notably the rise the number of long-term unemployed and people in the unemployment halo and the number of job seekers registered with Pôle Emploi† Finally, with regard to unemployment, we refer to the entry into force on 1 December of new compensation rules.
8. Bitcoin: An increasingly adopted crypto asset, but still very high in volatility!
Bitcoin prices broke new records for the first time in 2021. However, they remain subject to a very high volatility Bitcoin: In the past year, a Bitcoin has traded between $24,000 and $58,000 and has seen its price fluctuate in sometimes significant proportions. For example, on January 11 alone, the value of crypto assets fell by nearly 15%. This high volatility has not prevented Bitcoin from being increasingly adopted. Became official currency in El Salvador after summer, it attracts more and more users, especially in developing countrieswhere it appears to offer residents new opportunities to combat certain monetary imbalances and to provide new tools for international money transfers.
9. Signing a Global Agreement on the Taxation of Multinationals
Discussed for years in the framework of the Organization for Economic Co-operation and Development (OECD), a agreement on the taxation of multinationals was signed last October by representatives of nearly 136 countries. In particular, this agreement provides: more fairness in the tax rights of multinational companies and applying a minimum tax rate multinationals by 15%. Granted thanks to the turnaround of the United States in April, this agreement marks clear progress. However, it should not allow end all tax competition between states.
10. A Significant Crisis in Lebanon
A deep economic depression, severely deteriorated public finances, massive currency depreciation and runaway inflation: already before the outbreak of the Covid-19 pandemic, in the grip of economic difficulties, Lebanon sank into a serious crisis in 2021† In fact, according to the World Bank, it would be the third-largest economic crisis a country has faced since the mid-19th century.and century, behind Chile (1926) and Spain (1931) and far ahead of the United States (1929-1933) and Greece (2009)…