The global economic recovery has been strong and rapid, but the risks of a continuation of supply shortages and the consequent prolongation of inflation are more present than ever after the appearance of the omicron variant of the coronavirus.
This is the conclusion that emerges from the forecast report published by the Organization for Economic Cooperation and Development (OECD) on December 1, where the international organization has sent two clear messages.
On the one hand, it has issued a warning signal to the dangers of an imbalance that puts the global economy at risk, and on the other, it has proposed a future scenario that could be seriously affected if the bad omens regarding omicron are confirmed.
No recovery if coronavirus outbreaks persist
Laurence Boone, the chief economist of the OECD, assures that the central scenario managed by the institution is that of a global recovery that continues, with a rebound of 5.6 percent in economic growth in 2021, which in the case of Spain, it will remain at 4.5 percent.
Boone warns, however, that “striking imbalances have emerged.”
First, in the marked differences in recovery between countries. In the second instance, in the appearance of “serious labor shortages in some sectors.”
And finally, in “the persistent gulf between supply and demand for some goods, along with rising food and energy costs”; a situation that has caused a longer-than-anticipated price increase.
“These imbalances create uncertainty and more downside than upward risks,” says Boone, adding that the OECD’s main concern is the global polarity in terms of number of cases, hospital capacity and vaccination rates worldwide.
A vaccination rate that, according to the economist’s perspective, can generate sources of infection that end up being a “breeding ground for the most deadly strains of the virus.”
And even in more benign settings, he notes Boone, “ongoing coronavirus outbreaks may continue to restrict mobility […] with potentially long-lasting consequences for labor markets and production capacity, as well as for prices. “
Inflation also depends on the vaccine
The OECD foresees in its report that inflation will reach its peak at the end of 2021 to gradually decline to 3 percent on average in all member countries in 2023, as bottlenecks disappear and more people return to work .
So far, however, the doubts about the virulence of omicron and the protection offered by vaccines against the variant have become a reality. the worst forecast drawn by the OECD restrictions on mobility and persistent inflation.
For this reason, the Secretary General of the OECD, Matthias Cormann, has called for the acceleration of vaccination programs worldwide.
“The risks and uncertainties are great, as is being verified after the appearance of the omicron variant that aggravates the imbalances and threatens the recovery,” Cormann pointed out.
“Keeping the recovery under control will mean tackling these imbalances, but above all it will lead to better international coordination, improving health systems and making a significant leap in global vaccination programs,” he added.
The blind blows of the omicron market
The notice to sailors of the OECD It comes at a time of bewilderment at the impact that omicron will have on the economy and society, based on the danger it represents to health and its ability to escape vaccines.
On the one hand, the scientific community indicated that the first symptoms caused by the new strain were mild, alleviating market anxiety in the first instance.
The haven of calm, however, quickly disappeared after the statements of the CEO of the American pharmaceutical company Modern, Stephane Bancel, stating that the world will probably probably need new vaccines.
Given this possibility, and knowing now that omicron was present in the Netherlands even before it was detected in South Africa, governments have been quick to impose new containment measures that for the moment have mainly impacted tourism, but whose shadow also hangs over production and the prices of raw materials.
In fact, the president of the Fed, Jerome Powellhas changed the central bank’s tone, admitting that “the threat of persistent inflation” has increased, and preparing markets for an accelerated withdrawal of monetary stimuli (tapering).
Until now, the Fed’s top leader had always spoken of inflation as a transitory phenomenon. But as the OECD details in its report, “inflation is on everyone’s mind, and there is a lot of uncertainty about the reactions of central banks.”
The analysis of the international organization, again, hopes that the bottlenecks in the supply chain will disappear as the health situation improves, but urges to indicate that they will act if necessary.
Powell has already done it, and we only have to wait to learn more about the real risk that omicron entails.