Aviva Investors expects growth to slow in 2022 but inflation to remain high

(London) – Aviva Investors, the global asset management business of Aviva plc ('Aviva'), expects global growth to slow in 2022 but remain robust. World GDP growth is likely to be around four per cent this year and just above three per cent in 2023. 

Post-pandemic catch-up should continue, but the outlook has been significantly clouded by the Russian invasion of Ukraine. This has also exacerbated the spike in energy and commodity prices. The economic damage will be greatest in parts of Europe. The geo-political backdrop has been changed permanently by Russia’s actions and there are clearly greater dangers of an uncomfortable division of factions across the world. How China positions itself will be a critical element of any new world order.

High inflation is already eroding household real incomes and hurting sentiment, both of which will act as a brake on growth this year and next. Inflation is still expected to fall back later this year and during 2023, but the risk of a more damaging and lasting episode has risen. Comparisons to the stagflation of the 1970s are probably excessive, but there are some similarities.

Slower growth and high inflation put central banks in a difficult position, but most have clearly signalled a need for significantly tighter monetary policy, with the most forceful message coming from the US. Policy rates may need to move above neutral to slow growth and bring inflation back to target. This raises the risk of excessive policy-induced slowdown.

Michael Grady, head of investment strategy and chief economist at Aviva Investors, said:

“Recent events in Ukraine serve to highlight the fragility of the global geopolitical and economic order. These are likely to usher in a period of greater uncertainty, increased economic and market volatility and more challenging asset allocation decisions.

“With growth expected to remain above trend this year, and corporate pricing power seemingly robust, we prefer to be modestly overweight equities in developed markets, with a more neutral view in emerging markets. Recent spread widening in credit markets has provided an opportunity to move from a preferred underweight to neutral.

“With positive inflation surprises more likely and policy rates rising significantly to address overshoots, inflation risk premia need to be higher, while real rates need to adjust to slow growth. As such, we prefer to be underweight duration.”

For more information contact:

Victoria Howley

Media Relations Manager

Steve Ainger

Head of Media Relations

Important information

The information and opinions contained in this document are for use by the financial press and media only. No reliance may be placed for any purpose on the information or opinions contained in this document nor should they be seen as advice. 

The press release is provided on the basis that Aviva Investors Global Services Limited is not causing the communication of a financial promotion under exemption of the Financial Promotion Order, as Aviva Investors Global Services Limited has no control over the way in which an article based on this press release is prepared and published by the financial press and media. 

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”) as at 11 April 2022. Unless stated otherwise any views and opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. 

Issued by Aviva Investors Global Services Limited, registered in England No. 1151805. Registered Office: St Helen's, 1 Undershaft, London, EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority.

Aviva Investors

Aviva Investors is the global asset management business of Aviva plc. The business delivers investment management solutions, services and client-driven performance to clients worldwide. Aviva Investors operates in 14 countries in Asia Pacific, Europe, North America and the United Kingdom with assets under management of £268 billion in assets under management as at 31 December 2021.

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Aviva Investors Global Services Limited
St Helen's, 1 Undershaft, London, EC3P 3DQ

Phone     +44 (0)20 7809 6000

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Issued by Aviva Investors Global Services Limited, registered in England No. 1151805. 
Registered Office: St Helen's, 1 Undershaft, London, EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority and a member of the Investment Association.

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