There is a new coronavirus variant that poses a significant threat to global economies. The variant by the name of “Omicron” was first reported to the World Health Organization from South Africa on November 24th, 2021. Since then, cases have been identified in twenty other countries, such as Italy, Britain, the Netherlands, and now, the United States. At the moment, numerous countries have banned foreign travelers from entering.
The discovery of this new variant has caused panic across the world. Though much remains unknown about Omicron, the presence of a potentially lethal variant will lead to economic issues. The United States is currently recovering from the impacts from the start of the COVID-19 pandemic, and the Omicron variant brings great risks to its economic recovery. The Chair of the Federal Reserve of the United States, Jerome Powell, said, “The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation. Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.” Depending on the severity of the variant, unemployment rates could spike, as well as inflation.
So far, Omicron spreads faster than the Delta variant, which may be a sign that it is less deadly. If that is the case, its impact on the economy may be less extreme.
As of right now, the Biden Administration as well as other governments are reluctant to enforce lockdowns due to the economic damages that would occur and the fear that it would cause. Because supply chains are already strained, global lockdowns would strain it even further, leading to a recession.
If Omicron turns out to be anything like the Delta variant, Goldman Sachs expects global GDP to drop by 0.4% in 2022. If it’s worse than the Delta variant, the economy’s growth will decline further.