Around the Globe
WORLD | Dec 5, 2021

OECD raises alarm bells for possible Omicron fallout in world economy

/ Our Today

administrator
Reading Time: 3 minutes
Low vaccination areas could create “breeding grounds” for deadlier virus mutations. (Photo: Health.com)

The Organization for Economic Co-operation and Development (OECD) is raising the red flag on the impact of the Omicron coronavirus (COVID-19) variant on the global economy.

The Paris based-organization says Omicron is threatening the global economic recovery, as it lowered the growth forecast for 2021 and appealed for a swifter rollout of COVID vaccines. OECD, which has a member based on 38 countries argues that the global recovery has “lost momentum” as Omicron has cut the outlook of top economies including the United States, China and the Eurozone.

In its updated economic outlook, the OECD warns that low vaccination areas could create “breeding grounds” for deadlier virus mutations noting that the world economy is now expected to expand by 5.6 per cent this year, down from an earlier forecast of 5.7 per cent. Its forecast for 2022 remains unchanged at 4.5 per cent, but the OECD economic outlook report was released only days after Omicron was detected. 

Some countries risk being left behind

The OECD is urging monetary policymakers to “communicate clearly” about how far they will tolerate inflation exceeding their targets. The organization also highlighted “marked differences” in the recovery of countries around the world saying, “parts of the global economy are rebounding quickly. But others are at risk of being left behind, particularly lower-income countries where vaccination rates are low, and firms and employees in contact-intensive sectors where demand has yet to recover fully.”

OECD Chief Economist, Laurence Boone argued that the organization is concerned that the new variant of the virus, the Omicron strain, is further adding to the already high levels of uncertainty and risks, and that could be a threat to the recovery. While the OECD said it was “cautiously optimistic” about the recovery, it warned that health, high inflation, supply chain bottlenecks and potential policy missteps are “all key concerns”.

“The top policy priority remains the need to ensure that vaccines are produced and deployed as quickly as possible throughout the world, including booster doses,” the OECD said in a statement adding that, “the recovery will remain precarious and uncertain in all countries until this is achieved.”

The Organization for Economic Co-operation and Development’s (OECD) headquarters in Paris, France. (Photo: International Institute for Sustainable Development)

Articulating a benign scenario, Boone warned in an editorial in the report that, outbreaks could continue to prompt restrictions on people’s movements, which could have long-lasting consequences on labour markets, production capacity and prices.

“The harshest scenario is that pockets of low vaccination end up as breeding grounds for deadlier strains of the virus, which go on to damage lives and livelihoods,” Boon posited.

Developed countries of the Group of 20 wealthy and emerging nations have spent US$10 trillion to prop up their economies during the pandemic, while vaccinating the planet would cost only US$50 billion, Boone told reporters during a press conference last week.

Analysts at Oxford Economics say Omicron could shave 0.25 percentage points off global growth next year if it causes mild effects, but it would cost two percentage points if it is more dangerous and a large part of the global population was forced into lockdowns. The strain has been spotted around the world since South African experts discovered its existence, prompting new travel restrictions.

The World Health Organization (WHO) believes the variant’s high number of mutations might make it more transmissible or resistant to vaccines.

Comments

What To Read Next