Well, at least 2021 wasn’t that bad: The decade has (so far) been the exact opposite of the roaring 20s we were hoping for three years ago, and the prospects for a near-term return to the pre-2020 era of relative sunshine and rainbows aren’t looking great. The global economy continued to grapple with covid-19, while Russia’s war in Ukraine and the fight against inflation also wreaked havoc — and had significant knock-on effects here at home.

An economic war: Moscow’s decision to invade Ukraine on 24 February sparked chaos in global commodities markets and further amplified supply-driven inflationary pressures around the world. Any serious disruption to Russia’s economy, one of the world’s largest commodity exporters, was going to reverberate around the world. But the impact was an order of magnitude greater when Western nations put together the most stringent set of sanctions ever assembled in a bid to cut the Russian economy off from the rest of the world. Over a series of packages, the US and Europe escalated sanctions targeting the country’s financial system, banning imports of commodities, and restricting its shipping industry. The result was oil prices soaring towards USD 140 a barrel and such volatility in the metals markets that it broke the London Metals Exchange.

Food insecurity: The war also precipitated a food supply crisis when, from late February, deliveries of wheat from the world’s two largest suppliers stopped making it to the market. Moscow’s blockade of Ukraine’s Black Sea ports together with Western financial sanctions kept Ukrainian and Russian grain out of reach for many. Making matters worse, sanctions impacting the export of Russian fertilizers helped drive prices to record highs and cut global supply, making it harder for farmers across Africa and Asia to maintain agricultural production. This drove food prices to record highs, triggering food protectionist measures by some key exporters, and raising fears of a global hunger crisis. Global markets began turning a corner in July, when Turkey helped broker a wheat pact between Russia and Ukraine to resume grain exports through the Black Sea — although Moscow briefly bailed on the agreement, only to later extend it beyond its original 19 November expiration date.

Egypt was particularly exposed to the shock, as the world’s largest importer of wheat — with some 80% of its imports traditionally coming from Russia and Ukraine. Soaring global wheat prices led state grain buyer GASC to cancel more than one international tender over the course of the year, while availability of the grain came under yet more pressure as shipments destined for the private sector remained stuck at ports amid our FX shortage. This led GASC to start selling wheat to private mills and bakeries, as well as flour to private pasta makers. Meanwhile, the government significantly ramped up its basic commodity storage capacity — including tapping our friends at Hassan Allam Utilities, Orascom Construction, and Samcrete for EGP 4 bn in contracts to build four warehouses for grain and other basic commodity storage.

But it wasn’t just wheat: Russia and Ukraine also accounted for the majority of our sunflower oil imports. We’re also a net oil importer, leaving us vulnerable to the price squeeze that began as a result of a demand-supply imbalance during the post-pandemic recovery and has been exacerbated by the war, which has seen Europe pledge to wean itself off Russian fossil fuels.

Cue a whole year centered on fighting inflation: As 2021 was drawing to a close, it was becoming clear that the wave of inflation sweeping the globe wasn’t just a momentary aberration in a four-decade run of price stability, but a serious threat to the global economy.

By the end of 2021, prices in the US were growing at their fastest rate since the 1980s while several key emerging economies had begun to raise interest rates in a bid to cool prices. Whether central bankers could do much to tackle inflation caused by far-flung supply-side factors was an open question.

Here at home, inflation was a major pressure point for policy makers and the private sector: Inflation hit a five-year high of 18.7% in November as the Central Bank of Egypt, under new leadership, took the decision to float the EGP in late October, hitting food and beverage prices. In a bid to tamp down inflation, the central bank has enacted 800 bps of interest rate hikes throughout the year (more on that in Economy, above). Soaring costs have weighed heavily on non-oil private sector activity, which remained in contraction territory for the entirety of 2022.

The end of easy money: The Federal Reserve led the fastest wave of global monetary tightening seen in decades, raising interest rates by 75 bps on four separate occasions, driving them to their highest since late 2007 in a bid to kill demand.

So long to our carry trade: Egypt — once touted as one of the most attractive carry trades in the world — saw large outflows this year as rising interest rates around the world and soaring inflation triggered a global risk-off and sent Egypt’s real interest rate into negative territory. The exodus led the government to stress the importance of prioritizing foreign direct investment and export growth over hot money — a policy shift we very much support.

Meanwhile, covid isn’t fully gone (even if it’s long-forgotten in Egypt): China has continued to struggle with covid-19, as Beijing’s quest to completely shut the coronavirus out from the country began to take its toll on the economy. Authorities put some of the country’s biggest and most economically-important cities — such as Beijing, Shanghai and Shenzhen — being placed into total lockdown for weeks, putting more pressure on global supply chains. The Chinese government then made an abrupt u-turn on their uncompromising approach to the virus in December, seemingly in response to an outbreak of protests against another round of lockdowns in November. But rather than serving as the silver bullet for the country’s problems, the hasty backtrack has left China grappling with what much of the rest of the world faced back in the winter of 2020: Surging cases and hospitalizations, shortages of medical supplies, and supply chain disruptions caused by labor shortages.

None of this was good news for the economic outlook: In its series of economic forecasts throughout the year, the IMF sounded progressively more downbeat about the prospects for the global economy. After predicting last October that the global economy would grow 4.9% this year, one year later the Fund’s tone was noticeably more pessimistic. “The worst is yet to come, and for many people 2023 will feel like a recession,” its chief economist wrote in its October 2022 outlook, which projects 3.2% growth this year and 2.7% in 2023. By 4Q, investment bank analysts were projecting rising rates to tip the US into recession in 2023, and the eurozone economy to contract due to Europe’s energy crisis.

On that note, the World Bank is forecasting a slowdown in Egypt’s economic growth this fiscal year to 4.5%, down from 6.6% in FY 2021-2022, according to a recent report (pdf). The multilateral lender expects growth to slowly edge upwards, promoting stabilization and structural reform, allowing the debt-to-GDP to resume a downward trajectory over the medium-term with continued fiscal consolidation, the report says.

Or the markets: The global stock and bond markets have suffered one of the worst years on record due to tightening financial conditions. Some USD 14 tn of value has been wiped from equity benchmarks around the world while rising yields triggered an historic sell-off in global bonds. The IPO market — particularly for SPACs, the poster child for 2020 excess — has been almost non-existent, while bond issuance volumes have slumped amid the volatility.

Emerging and frontier markets were among the biggest victims of the turmoil as foreign investors pulled bns of USD from riskier assets and the greenback went from strength to strength, exacerbating pre-existing debt problems across low-income nations. In May, Sri Lanka defaulted on its debts for the first time in its history, while bonds of a record number of nations were trading at distressed levels during the summer.

The Gulf has been a totally different story: Buoyed by higher oil prices, 2022 was boom time for financial markets in the Gulf, where companies rushed to float in Abu Dhabi, Dubai and Riyadh. GCC exchanges recorded their busiest year for new listings ever, seeing 27 primary share sales raising USD 14.5 bn. Meanwhile the region’s sovereign wealth funds, awash with petrodollars, have flexed their financial muscles on a level not seen anywhere else in the world.