After limping its way back from the COVID pandemic last year, the global economic recovery has been rattled by the Omicron variant’s rapid rise.
The travel industry has been thrown into disarray again, workers have been forced to isolate at home and governments are facing a stark choice between imposing restrictions or letting the economy be.
Could the highly contagious Omicron variant have a severe impact on the recovery? Or will its mild symptoms keep the economy from sinking again?
How bad a hit on growth?
The head of the International Monetary Fund, Kristalina Georgieva, warned last month that global economic growth forecasts may have to be slashed following the emergence of Omicron.
The IMF has previously banked on growth of 5.9 percent for 2021 and 4.9 percent this year, but it could now revise its estimates later this month.
To soften the blow on the economy, US health authorities have cut the isolation period for asymptomatic cases by half to five days.
Mark Zandi, chief economist at Moody’s, told AFP he expects US growth of 2.2 percent in the first quarter, more than half lower than a previous estimate of 5.2 percent.
“Omicron is already doing economic damage, as is clear from weaker credit card spending, a decline in restaurant bookings, air flight cancelations, and many schools going back to online learning,” Zandi said.
“However, I do expect Omicron to pass through quickly and for growth to rebound in the second quarter, and growth for the year to be unaffected,” he added.
“Broadly, I think each wave of the virus is doing less damage to the healthcare system and economy than the previous wave.”
In the eurozone, tighter restrictions, consumer caution and absenteeism will reduce economic activity in the next few weeks, but the economy will rebound in February, according to Andrew Kenningham, chief Europe economist at Capital Economics.
Countries with lower vaccination rates, which are mainly developing economies, face greater uncertainty, and a zero-COVID policy in China could put a brake on growth in the world’s second-biggest economy as it locks down entire cities.
Will tourism suffer?
The travel industry was looking forward to a rebound in 2022 after it was devastated by border closures and lockdowns.
But the emergence of Omicron during the key winter holiday season caused thousands of flight cancellations, cruises to be forced to dock and fewer hotel bookings.