How has the global economy been affected by Omicron?

Paris (AFP) – What is the world waiting for after the economic shock that hit it at the beginning of 2020 with the emergence of Covid, followed by a glimmer of hope in the first half of 2021? Extensive outbreaks of the omicron mutant raises concern though International Economy Coping with the pandemic.

Is global growth under threat?
The extent of the economic damage caused by the mutant is unclear, but growth could suffer as long as restrictions and Omicron outbreaks affect the functioning of institutions.
The International Monetary Fund has warned since the beginning of December that it may revise its global growth forecast, knowing that it is now 5.9 percent for 2021 and 4.9 percent for 2022. This revision may take place by the end of January.
Moody’s chief economist Mark Zandi noted that Omicron “mainly caused damage” in the United States, expecting growth of 2.2 percent in the first quarter of the year, compared to 5.2 percent before the outbreak of the new mutation. But he expected these turmoil to dissipate in the second quarter of the year.
In the eurozone, the chief European economist at the Capital Economics Research Center, Andrew Kenningham, said that “Omicron will not lead to a contraction in GDP in the first quarter” with a rebound expected in February.
He summed up the situation by saying that “each wave causes less damage to the health and economic system compared to the one that preceded it.”
On the other hand, there is greater ambiguity regarding emerging countries that have not vaccinated their population to a large extent, as well as China, which is imposing a strict domestic stone in implementation of its “zero Covid” strategy.

What sectors are most affected?
Thousands of flights were canceled during the holidays, as well as cruises, while hotel reservations are weak, and Omicron is hindering the desired launch of the travel sector, which has suffered greatly from previous waves.
Specialists in the entertainment sector fear that the increase in the number of injured will dampen the enthusiasm of customers in cafes, theaters or cinemas.
But in the stock markets of the world, these sectors have been profitable for a few weeks now. “It seems that the market is legit after Omicron,” says Alexandre Paradis, an analyst from JJ France.
Since December 20, shares in cruise ship operator Carnival are up more than 20 percent, that of Air France about 15 percent, and maker of machinery and construction workshop tools Caterpillar up nearly 25 percent.
These stocks, which are highly affected by conditions, benefit from expectations of an imminent return to the economy, to its usual state.

Will inflation increase?

Prior to the advent of the Omicron, inflation in the United States and Europe reached its highest levels in several decades. And its pace could increase. In the euro area, the inflation rate in December reached a 25-year high, recording 5 percent in a year, according to what was confirmed Friday by the Eurostat statistics office.
“People who stay home because of the mutant are spending their money on consumer items instead of spending it on services like restaurants or entertainment,” said Jack Clenhans, chief economist at the American Federation of Traders.
The depletion of global channels of supply led to a scarcity of materials and raw materials, and an increase in demand could lead to an increase in prices.
The US Federal Reserve fears this scenario and intends to present its own schedule for raising interest rates, according to a report issued by its last meeting.
In addition, Brazilian or Nigerian families are losing their purchasing power due to inflation, and the British economy is on the brink of contraction, according to the British Chambers of Commerce.

Back at all costs
Large corporate aid programs in the spring of 2020 that increased global debt to $226 trillion last year, according to the International Monetary Fund, sounds like an old story.
“Resorting to measures such as partial unemployment was logical in a period of complete anxiety, when the industry was at a standstill,” in reference to the first quarantine measures, said a researcher at the Bruegel Bruegel Niclas Poitier Foundation.
But the world got used to coexisting with the pandemic and “more structural assistance measures are being talked about such as Build Back Better (which sets social and environmental plans in the United States) or “Next Generation Europe”, the European Union’s environmental and digital development programme, he said. Poitiers.
Targeted aid is also being granted to the most affected sectors, similar to the French or British programs targeting the tourism, hotel and restaurant sectors.