How will Omicron affect the economy?
The strong post-Covid economic recovery continues, but the presence of the new Omicron variant of the coronavirus and its rapid spread could have a significant impact on the slowdown in global economic growth. Let us take a look at what the experts have to say.
While it is true that the measures imposed by states were necessary to contain the pandemic, the restrictions paralysed the global economy with a historic drop in world GDP. Progress in vaccinations, especially in the most developed countries, and the expansive fiscal policies applied by governments and central banks have laid the foundations for an economic recovery that began at the end of 2020 and which seemed unstoppable until this new variant of the coronavirus came into play.
It is still too early to know with certainty the final impact of the resurgence of a pandemic that seemed under control, however, the Bank of Spain has confirmed that the recovery is deflating, and the Spanish economy is expected to grow by 4.5% this year (a point and a half below the 6% forecast in September). The uncertainty also lowers the growth forecast for next year by half a point, to 5.4%, and calls into question the optimism for 2023.
Forecasts in the International Monetary Fund (IMF) reports coincide when it comes to predicting a global economic slowdown caused by Omicron. It has also revised its growth forecasts downwards, given continuing supply chain logistics problems and uneven vaccination between countries.
Even so, the Organisation of the Petroleum Exporting Countries (OPEC) states in its monthly report: “The impact of the new variant Omicron is expected to be mild and short-lived, as the world becomes better equipped to manage Covid-19 and its related challenges”. Even so, it foresees continued growth in oil demand by 2022 with production at 4.2 million barrels per day.
OPEC’s encouraging statements coincide with studies that have been published on the efficacy of existing vaccines to combat this new variant of the coronavirus and have been reflected in stock market indexes around the world. Investment banking groups such as Goldman Sachs have not significantly altered growth projections, but do not rule out more negative scenarios, depending on whether the speed of transmission and hospitalisations of the omicron worsens the figures recorded with the Delta variant.
Although the majority of the world’s population is already vaccinated against Covid-19, the Omicron wave is once again cracking the economies of many countries that were just beginning to recover. Governments are once again under pressure to find a balance to protect the economy, jobs, and businesses without putting people at risk.
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