The emergence of the omicron variant of the coronavirus poses new risks to global economic growth and the outlook for inflation, as concerns about health risks from the variant intensify and several countries have imposed new travel restrictions on countries. last days. These restrictions are likely to increase in the coming weeks until scientists learn more about the variant, predicts the credit rating agency Moody’s.
“The omicron discovery underscores our view that the COVID-19 pandemic remains a health threat, as well as the main source of uncertainty for the global economy and a driver of financial market volatility.”, He pointed out in his Macroeconomics – Global report, published yesterday.
“At this time, we are maintaining the G-20 macroeconomic forecasts that we published in early November because information on the variance and the policy actions taken to date do not yet support a significant change in our forecasts, which were based on the expectation of that the virus will gradually become endemic and the outcome of the pandemic will be uneven and unpredictable”He adds.
Threat will depend on the transmissibility and virulence of the new variant
Just as many countries were heading toward what seemed like a post-pandemic normalcy, the omicron variant has injected new uncertainty.
However, the experience that followed the emergence of other variants, particularly the delta variant, and the public health policies implemented to counter successive waves of infections provide a basis for identifying the factors that will determine the economic and credit impact of this last variant.
Ómicron appears to have been identified early, increasing the ability of policymakers to take steps to curb its spread. It is not yet known whether this variant is more transmissible or more severe than other virus strains, or to what extent existing vaccines and treatments provide protection against severe disease.
However, continued progress in global vaccination efforts and people’s adherence to using tools such as face masks and social distancing will be an important factor in determining the economic impact of the new variant.
Countries with a guaranteed supply of vaccines and effective delivery systems, and high levels of public acceptance of the vaccine, will continue to be better positioned.
Characteristics of the virus will also influence private sector response
If officials ultimately determine that omicron poses a high risk to public health and if the variant proves difficult to contain with border closures, similar to the spread of the delta variant, authorities in several countries will likely impose renewed mobility restrictions.
The severity of the restrictions will vary depending on factors including the specific public health situation in each country, public support for the restrictions, and the willingness of the authorities to bear the economic and political costs associated with the restrictions.
The emergence of the new variant also occurs during a period of fragile economic recovery, with supply chains under pressure, high inflation and tight labor markets. Disruption of business as a result of the spread of the new variant could prevent supply chain stresses from easing, reducing production capacity and stoking more cost pressures in sectors exposed to global supply chains.
On the demand side, fear of infection could prevent a large proportion of people from engaging in economic activities that require close contact. Therefore, demand could decline for services ranging from hospitality to travel, at a time when spending related to vacations would generally increase.
Business plans to gradually return to a new post-pandemic normal are now uncertain. Until there is more clarity on the overall pandemic situation, the fear of contracting COVID-19, the longer uncertainty around schools and childcare, and renewed restrictions on international travel will continue to reduce the supply of hand. working.
Economies Vary In Their Ability To Withstand Another Wave Of Infections
Should the new variant lead to another rising wave of COVID-19 infections, the worst hit economies will be those with lower vaccination rates, greater dependence on tourism, and less ability to offer additional fiscal and monetary policy support for counteract the impact on the country’s growth from the resurgence of infections.
If the variant affects the risk appetite of the global market, it would cause more financial stress for debt issuers with large financing needs. For example, emerging economies that depend on international markets for loans could face higher refinancing risks.
Advanced economies, aided by the use of highly effective vaccines, high vaccination rates, and broad political support for the private sector, are in a better position to meet the challenges posed by the new variant than are emerging market countries.
But doubts about vaccines remain an obstacle to recovery in many places, including several advanced economies. European countries, including the United Kingdom (Aa3 stable), Germany (Aaa stable), France (Aa2 stable), the Netherlands (Aaa stable) and Belgium (Aa3 stable) have detected cases of omicron, prompting further restrictions Travel.
In addition, the restrictions imposed after a recent increase in delta infections could now be prolonged and expanded even further.
China’s COVID-19 zero tolerance policy (A1 stable) will further delay the relaxation of the rules around international travel versus the omicron variant. If the variant is discovered in the country, the authorities are likely to increase the severity of the restrictions.
The economic impact on other emerging market countries will be different and will depend on a combination of government constraints, people’s comfort with social interactions, and the ability of governments and central banks to provide additional support to the private sector, if necessary. Emerging market countries facing travel bans, including South Africa (negative Ba2), as well as those dependent on tourism revenue, face higher downside risks.
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