World economy gauges impact of omicron

Almost two years after the tsunami caused in the international economy by the emergence of the new coronavirus, experts from around the world are trying to assess the impact of the increase in infections by the omicron, after the unstable recovery of 2021.

Is global growth threatened?

The magnitude of the economic losses of the new variant is uncertain, but growth could suffer from both health restrictions and the damage caused by the contagious micron in the workforce of companies.

The director of the IMF (International Monetary Fund), Kristalina Georgieva, warned in early December of a downward revision of world growth projections, currently at 5.9% in 2021 and 4.9% in 2022. may be communicated at the end of January.

In the United States, the omicron already causes damage, confirms the chief economist of the Moody’s rating agency, Mark Zandi, who estimates a growth of 2.2% in the first quarter, against 5.2% before the impact of the new variant. .

These disturbances should dissipate from the second quarter, he believes.

In the euro zone, Andrew Kenningham, chief economist for Europe at Capital Economics, estimates that restrictions such as the lockdowns applied in the Netherlands or Austria will cause a slowdown in the first quarter, followed by a recovery if the peak of the epidemic is reached. in January.

“Each wave causes less damage to the healthcare system and the economy than the last,” summarizes Zandi.

Uncertainty is greatest in emerging countries, with lower vaccination coverage, and in China, which continues to apply draconian restrictions based on its “Covid zero” strategy.

Which sectors are most affected?

Thousands of flights canceled during the holidays, cruises diverted or suspended, drop in hotel bookings. The omicron has hampered the long-awaited recovery of the travel industry, especially hit by the pandemic.

The entertainment industry also fears that the explosion of cases will drive customers away from casinos, theaters, or movie theaters.

But in the financial markets, these sectors have been getting stronger and stronger for weeks.

“The market seems to be projecting itself in the post-omcron”, explains Alexandre Baradez, an analyst at the investment firm IG France.

Since Dec. 20, Carnival cruise company stock has increased nearly 20%; that of Air France, 15%; and that of engine and building materials manufacturer Caterpillar, nearly 25%.

These figures, which are heavily dependent on the conjuncture, illustrate the hope of imminent economic normalization.

Will inflation get worse?

Before the omicron, inflation rates in the United States and the eurozone were at their highest level in decades. And this phenomenon can be accelerated.

“People who stay at home because of the variant are more likely to spend their money on consumer goods rather than services like restaurants and entertainment,” says Jack Kleinhenz, chief economist at the American federation of merchants NRF.

Global supply chains are already strained, causing shortages of materials and raw materials. An increase in demand can make prices even more expensive.

It is the scenario feared by the Fed (Federal Reserve, the American Central Bank), which plans to advance its timetable for raising rates, according to the minutes of its last meeting.

In other economies, such as Brazil or Nigeria, households are seeing their purchasing power fall due to double-digit inflation, and the British economy is on the verge of contraction, according to the country’s chambers of commerce.

What will happen with the aid?

The massive business bailout programs in spring 2020, which added $226 trillion to global debt in the previous year according to the IMF, seem like a thing of the past.

“Using programs like partial unemployment made sense at a time when uncertainty was total, and the entire industry was at a standstill,” says Niclas Poitiers, a researcher at the Bruegel Institute.

But the planet has learned to live with Covid-19 and, “now, we are talking about launching more structural aid programs, such as Build Back Better (which provides for social and environmental reforms in the United States), or Next Generation”, the European Union’s ecological and digital transition, he adds.

There is still, however, more concentrated aid for the hardest-hit sectors, such as the French or British programs for the tourism, hotel and restaurant sectors.