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5 Major Economic Events That Happened for the First Time in 2022

5 Major Economic Events That Happened for the First Time in 2022

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Historically, 2022 was a year marked by a turning point in global politics and finance, indicating the end of one era and the beginning of another. As the key events of 2022 unfold, from the Russian invasion of Ukraine to the collapse of the crypto industry, there has always been a series of unexpected twists and turns. Here we highlight the five major economic events that happened for the first time in 2022 whose repercussions are likely to be apparent for years to come. 

A new year is approaching, and we should not forget that it is the start of a new chapter in history after quite a challenging year filled with wars, economic collapse, major political shifts, and more. Just as we were beginning to think the pandemic was over and things were returning to normal in 2022, an alarming amount of surprising and major economic events caught us off guard.  

Major Economic Events,2022 From The Editor

Global relations and monetary policies were adversely affected by a variety of social, economic, and political events in 2022. Let’s take them one by one. 

1. Russia-Ukraine War 

A number of news outlets have described 2022 as “the beginning of World War 3.” Among the most prominent major economic events are the invasion of Ukraine by the Russian military on February 24 has increased tensions between the two countries significantly. 

The UNHCR reported that thousands of people died during the invasion, resulting in Europe's biggest refugee crisis since World War II. 

Approximately 8 million people were displaced within the country by the end of May and 7.8 million Ukrainians fled the country by November 8, 2022, according to UNHCR. In the five weeks following the invasion, Russia witnessed its largest emigration in over a century. After that, prices spiked, supplies were disrupted, and there were food shortages, leaving the rest of the world in a state of struggle. 

As Russia invaded Ukraine, the European economy was thrown into a tailspin, followed by an energy crisis, and the global economy was weighed down by a potential recession. 

According to the International Monetary Fund (IMF), Russia and Ukraine have both emerged as major commodity producers, and disruptions there have sparked a surge in global oil and gas prices. Up to 30% of the global exports for wheat come from Ukraine and Russia, so food prices have also jumped. In addition, the IMF stated that it would negatively affect the entire global economy as it is among the major economic events of 2022, resulting in slower growth and higher inflation. 

2. The Cryptocurrency Bubble Collapsed 

The year 2022 was one of the most turbulent years in the history of cryptocurrency. In response to tightening monetary policy, geopolitical pressures, crypto winter, and shady centralized crypto exchanges like FTX, there was a major sell-off in the crypto industry this year.  

As of New Year’s Day 2022, bitcoin and Ethereum (ETH-USD) traded at $47,000 and $3,800, respectively – with bitcoin up slightly from its all-time high of $68,000 in November 2021 and Ethereum up modestly from $4,600. However, with just a few days to go before the end of the year, the price of bitcoin is sitting at $17,258 while the price of Ethereum is at $1,283.  

“Crypto winter” describes the chill that swept the cryptocurrency market in 2022, which brought the cryptocurrency market to its knees. Several major crypto players collapsed following TerraUSD's collapse: Three Arrows Capital, Voyager Digital, Celsius Network, FTX, and BlockFi. From November 2021's highs, Bitcoin, the biggest token by market value, plunged more than 60%, leading to a rout in digital assets that erased more than $2 trillion in total market value. 

The FTX bankruptcy, which has been in the headlines recently, is the latest entrant into the crypto turmoil. Crypto markets were shaken when the exchange announced it would file for bankruptcy following days of corporate drama, fueling fears about the aching industry now under investigation. 

There is a high probability that the crypto exchange market will continue to fail and collapse in the coming years, according to many experts. There’s no escaping the fact that bad actors will take advantage of unsuspecting customers as the number of users flock to this exciting new space grows.  

To minimize the risk of losing their assets in a potential exchange failure, investors should protect their funds and keep them in cold wallets. This rapidly changing landscape can be navigated with vigilance and smart investing. Learn more about Digital Wallets, an Introduction to Cryptocurrency Wallets to help you make better investment decisions. 

3. Turmoil Rocks British Politics 

In October 2022, Rishi Sunak becomes the fifth prime minister in six years, making him the third prime minister in less than two months. There was the fastest leadership turnover in the UK for nearly a century, hinting at massive political chaos. 

A country that once spanned the globe lost the world’s longest-reigning monarch and had three prime ministers in just two months. A seemingly endless parade of scandals led to more than fifty members of Boris Johnson’s government resigning in July after protesting the turmoil at 10 Downing Street. As a result, he resigned, and Liz Truss took his place. Having served as prime minister for only forty-five days-she had the shortest tenure of any British prime minister in history.  

In an internal Conservative Party election, Truss won with just 0.3 percent of registered British voters participating. The first thing she did when she came to power was to slash taxes immediately, sealing her doom. As a result of the move, the value of the British pound plummeted. As Britain’s first black prime minister, Rishi Sunak was tasked with picking up the pieces after Johnson’s fall. There are formidable obstacles in his way. 

Because of Russia’s invasion of Ukraine, energy prices are skyrocketing, causing Britain to appear to be in a recession with inflation at 15 percent. The bigger problem, and the origin of Britain’s turmoil, is that Brexit hasn’t produced the economic boom that proponents predicted. Despite what “Remainers” may say, a return to the European Union is unlikely.  

The British pound (GBP) has fallen to its lowest level against the US dollar in decades, as fears of runaway inflation and a recession have driven selling pressure on the currency. In 2022, the result of major economic events prompted the value of the pound sterling to fall by about 2% to $1.1042. It was the lowest since early 1985 (a 37-year low). 

4. Global Inflation Peaks 

In 2022, the global economy has gone through an inflationary shock of such magnitude that it has not been seen since the beginning of the 1970s.  

“CEBR reports that key questions for the coming year include whether restraining inflation will be painful for the world economy, whether any potential contractions can be kept short and shallow, or whether a more prolonged reduction in demand will be necessary to bring price growth back to more comfortable levels.” 

The Russian invasion of Ukraine in February 2022 resulted in a sharp rise in inflation, though the CEBR report notes that supply chain disruptions, a lack of input materials, and shifting consumer demand patterns had already caused price pressure in a number of sectors and economies in 2021. Global oil prices reached $120 per barrel (Brent) after the war broke out before falling back again to around $90 by the end of 2022. 

Further, the war against inflation hasn’t been won yet. Inflationary pressures have indeed become entrenched in the global economy, as measured by core inflation, which strips out volatile food and energy prices, and has risen several times above central banks’ inflation targets across developed economies. As a result, inflation expectations may become unanchored. 

Despite the costs to the economy, central banks are expected to stand firm in 2023. It may result in relatively large asset price corrections. House prices in the U.S. and UK are starting to suffer as the pace of monetary tightening picks up. As interest rates have increased and earnings potential has been discounted more heavily in 2022, global tech stocks have also suffered. 

A combination of central bank's interest rate hikes to combat inflation and inflation could threaten the entire global economy, warned the International Monetary Fund (IMF). 

5. Strong US Dollar Threatens Global Currencies 

As compared to major currencies, the U.S. dollar's value in 2022 has grown an impressive 14%, reaching its highest level since the early 2000s. 

Even though recession fears and signs of a slowing economy persist, the dollar continues to surge. A steady upward trend for a year has led the strong US dollar to surpass the Euro for the first time in two decades. Furthermore, the strong US dollar also reduces the value of the Japanese yen significantly. 

What the Strong US dollar has to do with the Global Economy?
Source: FactSet

Raise in interest rates by the Fed almost certainly worsens Europe’s hardships. When interest rates rise, borrowing money becomes more expensive, which increases the US dollar’s value over other currencies. Euro-dollar exchange rates have fallen by 12% over the last year, reaching one-to-one, its lowest level for 20 years. The British pound, on the other hand, has plummeted by more than 15% since the mid-1980s. 

Compared to the dollar, the Japanese yen declined by 20%, the Chinese renminbi declined by 9%, the Indian rupee declined by 7%, and the Swiss franc declined by 5%. There are many ways in which the changing values of currencies affect the real world.  

Due to the rise in the dollar and the depreciation of their currencies, governments borrowing heavily in dollars have an increased need for dollars. 

Despite that, the latest U.S. inflation report is higher than expected. Thus, traders are betting more on Fed rate hikes next year. With an eye toward ending high inflation in the country, the Federal Reserve recently reaffirmed its commitment to keeping rates high “until the job is done.” This should continue to support the value of the US dollar.


Is the Global economy headed for a recession in 2023? 

What do experts say? 

According to Bloomberg, the Centre for Economics and Business Research (CEBR) predicted that a recession is likely to begin in 2023.  

Despite the world economy surpassing $100 trillion for the first time in 2022, the World Economic League Table predicts it will stall in 2023 as policymakers fight high prices.  

“Rising interest rates in response to higher inflation are likely to result in a recession in the world economy next year,” says Kay Daniel Neufeld, director, and head of CEBR’s Forecasting department. New borrowing costs introduced to combat inflation cause some economies to contract. 

“The war against inflation has not yet been won. We expect central banks to stick with their policies despite the economic costs. Lower inflation results in reduced growth prospects for many years to come,” said the report. 

The likelihood of a recession in the next 12 months has increased from 49% to 63%, according to economists. The survey puts the probability above 50% for the first time since the last recession ended in July 2020. According to analysts, 2023 will be the third-worst year for global growth since the financial crisis in 2009 and the pandemic in 2020. 

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