Invasion, inflation and stagnation: 2022 in review

Today’s top stories

• Japanese bond yields continued to rise after a surprise policy move from the Bank of Japan that was interpreted by traders as a long awaited “pivot” towards following other big central banks in raising interest rates.

• The US continues to add Chinese companies to its trade blacklist as the chip war deepens. The world’s top manufacturers warned carmakers that the shortage that has plagued the industry for the past 18 months will last all next year. You can read more about the global chip wars in last Wednesday’s DT.

• A US congressional committee voted to release Donald Trump’s previously confidential tax returns, in a move that could shed new light on the former president’s finances following a years-long legal stand-off.

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Good evening,

In this last edition of Disrupted Times for 2022 we look back at some of the big themes of the past 12 months — a year shaped by war in Europe, an energy shock, surging inflation and a reminder that coronavirus is not yet done.

The year began ominously, with Russia’s full-blown invasion of Ukraine in February putting paid to any hopes that the global economy might be able to move on from the destruction of the pandemic.

One of the biggest consequences has been an energy crisis in Europe and a frantic scramble to find alternatives to Russian gas. Energy ministers have finally agreed on a price cap on Russian exports of oil and gas but the EU energy regulator today expressed doubt that it would lead to cheaper supplies for business and consumers.

Hopes for a swifter transition to more sustainable sources of energy have taken a knock in the process, with global coal use set to hit an all-time high. World oil markets were also recast as western countries tried to limit Russia’s revenues, one of many moves aimed at disrupting its economy.

The conflict wrecked supply chains, threatened global food markets and fuelled a global cost of living crisis. And although there are signs that headline inflation has peaked, new FT analysis shows core inflation in many countries continuing to rise.

Containing this surge by raising interest rates has been the main preoccupation of the world’s central banks this year. The US Federal Reserve, the European Central Bank and the Bank of England last week began to slow the pace of rises but at the same time dented investor optimism with warnings that their policy tightening still had a way to go. The combination of higher borrowing costs, a strong dollar and the rise in inflation meanwhile has left many of the world’s poorer countries with serious debt problems.

How quickly central banks can get inflation under control and the outcome of the war will be the defining factors of 2023, says chief economics commentator Martin Wolf. As far as the conflict goes, Russian president Vladimir Putin hinted yesterday it was unlikely to be over anytime soon.

In the meantime, many of the problems sparked by the pandemic are still with us, including labour shortages. The UK, still struggling with the consequences of leaving the EU (our film The Brexit Effect has now clocked up more than 5mn views), has in addition been hit by a rise in economic inactivity, interpreted by a parliamentary report this week as the “shape of things to come”.

Any hopes that the UK might chart a new confident course post-Brexit were dashed by a year of political chaos, with the country now headed by its third prime minister and fourth chancellor of the year. The ruling Tory party’s reputation for economic management is in the dustbin after financial markets gave a huge thumbs down to its economic plans while the country ends the year engulfed in public sector strikes.

And as 2022 draws to a close we have another reminder that the pandemic is far from over. China has been hit by what it calls an “exit wave” of infections after abruptly abandoning its stringent zero-Covid policies that had so badly damaged its economy, with new data today laying bare the hit to its public finances. The government promises “normalcy by spring”. Narrowing the definition of Covid deaths is one way of doing it.

And finally, lest we end on too depressing a note, Martin Wolf has also outlined a few reasons to be cheerful.

“For those of us who believe in democracy, the rule of law, continued economic advance, global economic integration, sound financial markets and monetary stability, 2022 was not entirely bad,” he writes. “Yet let us hope that 2023 is better. It needs to be.”

Disrupted Times is taking a festive break and will be back in your inbox on Wednesday January 4. We wish all our readers a happy and restful holiday.

Need to know: UK and Europe economy

UK public sector borrowing nearly tripled in November compared with last year to hit £22bn, a record for the month, thanks to continued support with energy bills and higher inflation.

The move away from cash, another trend accelerated by the pandemic, continues. An ECB study showed card payments in the eurozone have become the most important transactions by value, even as some countries such as Italy sought to protect cash transactions.

Need to know: Global economy

Now that the era of easy money is over, the cracks are showing in the global financial system. Watch our new film to find out what we might expect from fractured markets in 2023. And here’s our Big Read on whether pension systems are fit for purpose after the recent UK gilts crisis.

Need to know: business

Elon Musk has defended his cost-cutting strategy at Twitter, saying the company would have faced a $3bn negative cash flow without it. It has been a volatile year for the tech tycoon, who agreed to buy the social media platform in April, before backing out, getting mired in a legal wrangle then finally buying the company in October for $44bn. After taking control, he promptly sacked half of its workforce to cut costs then put his tenure as chief executive to a vote. Twitter users chose to jettison the billionaire, bringing a whirlwind, “seat-of-the-pants” reign (as Bill Gates has dubbed it) to a swift end . . . if he actually steps down.

Brussels’ squeeze on tech companies is set to deepen as it prepares for the implementation of its Digital Markets Act. In the meantime, Meta has been slapped with an EU antitrust complaint over concerns that Facebook’s classified advert service is unfair to rivals, while Apple is being forced to open up its App Store in the biggest threat to control over its operating system in 15 years.

One of the USA’s largest bitcoin miners, Core Scientific, has filed for bankruptcy in another blow to the crypto industry, which has been in freefall as investors pull record levels of bitcoin from exchanges. FTX, the most high-profile casualty, collapsed last month with an $8bn hole in its balance sheet, leaving clients unable to withdraw funds. FTX’s founder, Sam Bankman-Fried, has been accused of “one of the biggest financial frauds in US history” and has agreed to be extradited from the Bahamas to face charges.

Here’s a look at the year in UK tech from our sister publication Sifted.

The World of Work

Traditionally it’s been bad form to talk about what you earn, but the upending of work norms during the pandemic has led to a change in attitudes and a growing move towards pay transparency, writes Working It editor Sophia Smith.

With the return of Christmas parties and companies winding down for the holidays, this December has become the closest many of us have come to the resumption of normal life in three years. And that, writes columnist Pilita Clark, is something to celebrate.

But if you’re reading this on the day after the night before and worry you may have embarrassed yourself on the dance floor, best get some advice from the latest Working It podcast.

Get the latest worldwide picture with our vaccine tracker

Some good news

Almost 200 nations agreed to protect a third of the world’s land, inland waters, coastal areas and oceans by 2030 at the UN’s biodiversity summit in Montreal, Canada. Although not legally binding, the commitment is a marked increase on current safeguards and includes the introduction of a new biodiversity fund amounting to $30bn per year.