Economic experts agree that the recovery will continue through 2022 and 2023, producing outsized growth of 4.7% next year. While there are a lot of positive trends supporting growth, there are three risks that could derail the economic recovery. During a 2022 outlook webinar, Richard Barkham, global chief economist, head of global research and head of Americas research for CBRE outlined his top concerns for 2022.

The first threat should be no surprise to anyone: the COVID variants. First, Delta variant came, and now a new variant, Omicron, could bring another wave of infections that could result in stalled reopening plans. “We don’t know yet what that holds,” said Barkham. “The early evidence suggests that while it is more infectious, it is less deadly, and the evidence is beginning to emerge that the vaccine still provides mitigation effects on the severity of the virus.”

That’s good news. If the variant is less likely to cause serious illness and the vaccines provide some level of protection, the new variant won’t interfere with economic gains. Our current view is that the Omicron won’t be any more serious than the Delta variant, meaning that it is not going to derail the economy,” says Barkham.

Barkham is also concerned about the slow down in China. In the third quarter, the country’s massive economy reported only 1% GDP growth. Comparatively, it has had 7.8% quarterly growth from 2010 through 2019. This is largely due to supply chain disruption as well as new energy regulations. “China GDP growth drives 40% of global demand, so a slowdown in China affects everyone,” says Barkham. “We don’t think this will derail the US economy, but it is one thing we are keeping an eye on.”

And, while government fiscal and monetary expansion is supporting economic growth, inflation—which will likely lead to higher interest rates—are having the opposite effect. Barkham believes that the current inflation trend is transitory because of the intense demand for goods, but he expects the inflation rate to hit 2.2% by the end of the year. That means The Fed will tighten in response. “We do see monetary tightening coming by reducing quantitative easing and possibly increasing The Fed funds rate,” said Barkham, adding that the response will have and impact on the commercial real estate market but not the economy. “Although the tightening will be there, The Fed won’t take risks with growth. So, it won’t derail the economy, but the 10-Year Treasury will rise.”