Coronavirus: Omicron could cause worst-case scenario for growth

Global growth will slow this year and a worst-case scenario is not ruled out under the effect of the Omicron variant, which is spreading like wildfire on all continents, accentuating labor shortages and logistical problems, the World Bank warned on Tuesday.

The institution revised downwards, by 0.2 point, its forecast for global GDP growth for 2022, to 4.1%, after 5.5% in 2021, also down 0.2 point compared to estimate from last June. However, according to different hypotheses, “the simultaneous economic disruption caused by Omicron could further reduce global growth this year, by 0.2 to 0.7 percentage point”, which would bring growth to 3.9%, or even 3 , 4%.

Ayhan Kose, head of forecasts for the World Bank, points out that this wave has for the moment less restrictions than the initial wave of 2020. “And if the wave were to subside soon, the economic impact would be rather benign”, he said. But in the scenario of a variant taking hold, labor shortages would be more acute, further disrupting global supply chains and fueling inflation. Faced with galloping inflation, the US central bank could suddenly raise rates, which would increase the cost of borrowing for emerging countries, already subject to record debt.

United States and China not spared

Ayhan Kose stresses that vaccination remains the key element, as the threat of new, more transmissible or virulent variants will persist until a substantial part of the world’s population is vaccinated. At the current rate of vaccination, “only about a third of the population in low-income countries will have received even a single dose of vaccine by the end of 2023,” he laments. in his report.

The two leading powers in the world, the United States and China, engines of global growth, are not spared. US growth has thus been revised down sharply for 2022, to 3.7% (–0.5 point) after 5.6% in 2021 (–1.2 point). “Stubborn inflation and an even faster tightening of monetary policy could lead to weaker than expected growth. “

Chinese growth for its part is now estimated at 5.1% (–0.3 point), against 8% (–0.5 point) in 2021. It is decelerating “more than expected”, notes the institution. “The possibility of a marked and prolonged slowdown in the heavily indebted real estate sector – and its potential effects on house prices, consumer spending and local government financing – constitutes a significant downside risk to the outlook” of the Chinese economy, concludes the Bank.

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