The Omicron variant of COVID-19 hit hard across the world and the world economy has been affected very badly. Cancellation of thousands of flights, calling off games and sports, and shutting down expensive stores are some effects of its intensity.
Omicron, the latest Corona variant has already created panic in many western countries, while experts are worried about its impact on the world economy had been recovered a lot from the early Corona effect from the end of 2019.
The variant was discovered in South Africa. However, due to its transmission, even many Second and third-world countries have been forced to revise travel guidelines, in the face of a new phase of the epidemic. Covid is once again showing its ugly face to the world economy.
Undoubtedly, it will have some economic impact. In the UK, real-time data of restaurant reservations and online job advertising elements were well above the equivalent day last year. The retail situation was just 8% below the equivalent day in 2019.
Even with a considerable number of Delta variant cases along with some weekly deaths, things were beginning to get back to normal. However, Omicron has paused some of this process, merely by injecting doubt that the pandemic is behind us.
Scientists all around the world are trying to determine the impact of the highly-mutated variant of COVID-19, while many economic experts are worried about its effects on global trade and the world economy.
Omicron and threat to Global Economy
If the world fails to limit the spreading of the new variants, it could lead to a huge rise in the number of global infections, which in turn, make hospitalize so many people in nations that have low-vaccine protection.
World-famous economic research group OECD (Organization for Economic Co-operation and Development states that the western governments might have to bring in fresh emergency financial support for businesses and households if the world sees some kinda shutdown.
OECD has raised concern over the rapid expansion of Omicron variants. Their main point of talking is that a renewed Covid wave will deteriorate the recovery of the global economy. The inflation rate is persistently high as well.
If Omicron turns into the main COVID variant, in terms of vaccine resistance and transmissibility, it could disrupt an already damaged supply chain network. The result can be higher inflation and a slowdown in global economic activity.
What Happens if Omicron Becomes More Severe?
There is an intense possibility that the Omicron variant will get more severe in the coming days. If that happens, governments around the world would impose stricter restrictions.
It will hit the normal economic flow, hamper the supply of foods and services and curb the world economy in such ways that were seen in the earliest phase of the pandemic.
According to Laurence Boone, chief economist of OECD, there are two possible scenarios if Omicron initiates a global crisis.
She states, One is it would create more supply problems and higher inflation for longer times. And another is we have to activate more restrictions where it’s severe.
As a result, demand would decline and inflation would increase at a faster rate than what we have at present, she added.
Furthermore, she thinks, the more severe Omicron variant could force governments to spread out emergency aid with a view to protecting mass people and business organizations, where they would need more fiscal and financial support.
Omicron’s Impact is Already Evident
During the previous wave of Corona, it was witnessed that the travel and tourism sector has been affected very badly. They started facing the same heat after the discovery of the Omicron variant.
For the same reason, the aviation, restaurant, and hospitality industry are witnessing a deteriorating situation. So, the world economy is going to be at stake as it was in 2020.
If the new variant goes out of control after some days, other mainstream industries and businesses will equally suffer.
A Weak Start to 2022
The United States of America is the largest economy in the world. It’s facing hard times amid the spreading of the Omicron variant.
Cancellation of thousands of flights, calling off games and sports, and shutting down of Expensive tech stores in new york–are all the visible effects of the Omicron variant.
Covid is once again causing mayhem in the US economy as it did to many parts of the world economy. All of this explains why some economists are downsizing their forecast for the beginning of 2022.
In the first quarter of 2022, the economy will see weakness, said Aneta Markowska, chief economist at Jefferies.
According to her estimation, in the first quarter, the US economy would grow only at an annualized pace of just 1.5%. This will be the worst quarter after the beginning of the recovery in mid-2020.
In January US payrolls could shrink because of Omicron, Added Markowska.
Last week, Moody’s Analytics’s Chief economist, Mark Zandi told the media he can’t help but plan to dim his economic forecast of the world economy for 2022, because of the punch of Omicron and sees a bleak picture ahead.
David Kelly, the chief strategist at JP Morgan Chase, admits that due to Omicron severity and child tax credit in Build Back Better, the spending will likely be weaker in the first quarter of 2022.
Rather than putting the economy towards a recession, it’s necessary to expand the periods of recovery added the JP Morgan strategist.
Shortage of Vaccination
In its latest economic report, OECD states the failure of rapid and effective vaccination as the reason for the imbalance in the recovering world economy.
The report forecast global GDP growth at 5.6% this year, but 4.5% in the next year. This scenario would get worse in 2023 when it would be only 3.2 %.
It’s interesting that, according to Boone’s estimation, the G20 group of wealthy nations had spent 10 Trillion dollars in emergency aid in the starting phase of Corona, however, it would have needed just $50 Billion to ensure vaccination worldwide.
She thinks it is Visonic myopia as the world leaders haven’t been able to see the failure.
We’re spending a lot to support our economies, but failing to make the vaccination successful, she added.
Last Words
In this way, the spreading of the Omicron variant has put a big question mark on future economic activity. The answer will depend on its severity, duration, and people’s fight against it.
