The World Bank warned that “Omicron-driven economic disruptions” would decelerate growth.
Paris:
After limping back from the Covid pandemic last year, the global economic recovery has been hampered by the rapid rise of the Omicron variant.
The travel industry is in turmoil again, workers are forced to isolate at home and governments are faced with a clear choice between imposing restrictions or letting the economy go. into turmoil.
Could the highly contagious Omicron variant have a serious impact on recovery? Or will its mild symptoms keep the economy from sinking again?
What is the negative impact on growth?
The World Bank on Tuesday cut its global forecast for 2022, warning that “economic disruptions driven by Omicrons” along with other factors, would cause “a marked deceleration” in growth in this year.
The Washington-based lender said growth would slow to 4.1% after recovering to 5.5% in 2021 but warned it could be as low as 3.4%.
World Bank President David Malpass expressed concern about the “huge damage” the pandemic is doing to poor countries, pointing to a “disturbing reversal in poverty, nutrition and health.”
The head of the International Monetary Fund, Kristalina Georgieva, warned last month that it could also cut its global growth forecast due to Omicron.
The IMF previously banked growth of 5.9% for 2021 and 4.9% this year.
To lessen the blow to the economy, US health authorities have cut the quarantine period for asymptomatic cases from half to five days.
Mark Zandi, chief economist at Moody’s, told AFP he expected US growth of 2.2% in the first quarter, less than half of the previous estimate of 5.2%.
“Omicron is taking a toll on the economy, obviously weaker credit card spending, reduced restaurant bookings, flight cancellations and more schools going back to online learning,” said Zandi.
“However, I expect Omicron to quickly pull through and growth rebound in Q2 and growth for the year will be unaffected,” he added.
“Overall, I think each wave of the virus is less damaging to the health care system and to the economy than the last.”
In the eurozone, tighter restrictions, consumer caution and absenteeism will dampen economic activity over the next few weeks, but the economy should rebound in February. , according to Andrew Kenningham, chief European economist at Capital Economics.
Developing countries with lower vaccination rates face greater uncertainty, and a zero-Covid policy in China could hamper growth in the world’s second-largest economy as it shuts down. entire cities.
Will tourism be affected?
The travel industry has been expecting a rebound in 2022 after it was ravaged by border closures and lockdowns.
But Omicron’s arrival during the crucial winter holiday has resulted in thousands of flight cancellations, forced cruises and fewer hotel bookings.
However, investors were upbeat as shares of airline and travel companies rose in recent weeks.
“Markets seem to be looking at the post-Omicron era,” said Alexandre Baradez, analyst at IG France.
Will inflation worsen?
The economic recovery has had an adverse side effect: Inflation has surged to decade-highs in the United States and Europe as soaring energy prices and soaring demand face supply shortages.
Central banks have insisted that high inflation is temporary and that prices will eventually fall, but it has taken a toll on consumers and businesses.
“There is little certainty about Omicron’s impact on consumer demand, but those who stay at home because of this variant are more likely to spend their money on goods,” said Jack Kleinhenz, chief economist. retail rather than services such as dining out or in-person entertainment”. at the National Retail Federation of America.
“That will put more pressure on inflation as supply chains are already overwhelmed globally,” he said.
Supply chain bottlenecks caused massive shortages of raw materials last year, sending prices for many products soaring. Higher demand for commoditized products could continue to drive up prices.
The Federal Reserve rattled markets last week when it signaled that it was ready to tighten monetary policy more aggressively to rein in inflation.
Out of stimulation?
According to the IMF, governments launched massive stimulus programs in 2020 to save their economies, piling up debts of $226 trillion.
Niclas Poitiers, research fellow at Bruegel, a Brussels-based think tank, said Furlough’s plans to keep people employed “make sense” when there is so much uncertainty and the whole closed industry.
“I don’t see the need for huge capital sources for the economy yet,” Poitiers said.
Instead, the United States and Europe are investing in structural programs, such as the General’s $1.75 trillion “Building Back Better” climate and social spending plan. President Joe Biden.
(Except for the title, this story has not been edited by NDTV staff and is published from an aggregated feed.)
