OECD Highlights Threat To Global Economic Recovery Due To The Omicron Variant
The emergence of the Omicron variant of the coronavirus has unleashed a fresh wave of panic throughout the world. Top scientists of the World Health Organization have designated the variant as ‘a variant of concerns’ and has said it is the most infectious among the given variants of the coronavirus discovered so far.
The virus has already spread to dozens of countries. Some of the developing economies of Europe and the United States are seeing a huge surge of Covid-19 cases caused by the Omicron variant. Some countries have been forced to revise travel guidelines while others explore the imposition of fresh lockdowns. The Netherlands has already announced a Christmas lockdown to prevent the spread of the variant.
Despite this, experts believe that the Omicron variant will soon become the top variant of the virus and spread worldwide.
On the other hand, the dire forecast to global health because of Omicron is also troubling many organisations and experts worried about its impact on global trade and the still-fragile global economic recovery.
According to assessments by the economic think-tank Organisation for Economic Co-operation and Development (OECD), governments in western economies could be forced to impose fresh emergency financial support for businesses and households in the Omicron variant, causing a severe slowdown of the global economy. The OECD has identified the rapid spread of the Omicron variant as the single biggest cause of concern for the global economy, which can wreak havoc to the global economy, which is already struggling with high inflation and clogging of the global supply chain.
The already battered global supply chains could be further disrupted if Omicron turns out to become the dominant Covid-19 variant – primarily because of its very high transmissibility and resistance to the available vaccines. The OECD forecast that high inflation could become persistent in such a situation, triggering a slowdown of the global economy.
Any form of the return of the severe restrictions seen during 2020 linked to the pandemic could result in a severe blow to demand goods and services, curbing the global economy.
According to Laurence Boone, chief economist of the OECD, if the Omicron variant triggers a global crisis, two possible scenarios could emerge.
“One is where it creates more supply disruptions and prolongs higher inflation for longer. And one where it is more severe, and we have to use more mobility restrictions, in which case demand could decline, and inflation could recede much faster than what we have here,” she said.
Governments could be forced to dole out emergency aid to shield businesses and households of the Omicron variant-induced wave turn out to be as severe, or more, as the first or the Delta variant wave, Boone said.
A return of the worldwide wave of the pandemic could hit the already battered travel and tourism sector – which was witnessing some recovery in recent months. Ancillary sectors such as aviation, restaurant and other linked sectors are already witnessing a drop in economic activity in many countries due to the spread of the Omicron virus.
Many other key industries, ranging from industrial activity to services, could also see a slowdown if the pandemic once again goes out of control due to the new variant.
As it is, the fragile global economic recovery was becoming increasingly imbalanced because of a significant Covid-19 imbalance around the world, says the latest OECD report. It forecasts global GDP growth of 5.6% for 2021 and 4.5% for 2022 and then settling down to a growth rate of about 3.2% in 2023.
Citing the global vaccine imbalance, Boone noted that only about $50 billion would be required to ensure worldwide vaccination. In comparison, the G20 group of rich countries had expended about $10 trillion in emergency aid since the beginning of the pandemic.
“The news about the Omicron variant may be a reminder of how short-sighted that failure has been. We’re spending to support our economies, while we’re failing to vaccinate the whole world,” she said. “As a result, the world is not looking better.”