The September 2022 Chief Economists Outlook1 launches at a time of significant economic danger. The risks highlighted in our May outlook have begun to crystallize, dramatically so in the case of persistent inflation, which has surged to levels not seen in a generation in response to a combination of demand-side and supply-side factors.

This in turn has triggered a sharp tightening of monetary policy in many countries, including the United States, threatening to choke off global growth. Meanwhile, real wages and consumer confidence are in freefall, adding further headwinds to growth and raising the prospect of social unrest.

Against this daunting backdrop, leaders face a catalogue of challenging decisions and trade-offs. As policy-makers seek to rein in inflation they risk triggering recession and a spike in unemployment.

Introducing fiscal support measures for struggling households risks adding to levels of public borrowing that are already high after the outlays required by previous crises. Debt distress is at worrying levels among lower-income countries, increasing their exposure to additional shocks, such as climate-related natural disasters and placing many in a vicious cycle of debt servicing costs. The aftereffects of the pandemic era disruptions and the ongoing war in Ukraine are contributory factors in the current global economic picture.

The longer-term risk is that deepening geopolitical fissures continue to undermine policy coordination, weaken the global interconnectedness built over numerous decades and reduce opportunity, investment and growth potential for all.

This is dramatically illustrated by changes to global supply chains as businesses seek to recalibrate in response to numerous shocks to global political and economic systems. Domestically and globally, we are in uncharted waters in the months ahead, and the repercussions of decisions by policy-makers and business leaders will be with us for years to come.