As Omicron ‘Aggravates’ Supply Chain and Inflation Concerns, OECD Backpedals on Global Economic Growth Report
In a statement released Dec. 1, the Organization for Economic Cooperation and Development (OECD) cut its global economic growth outlook for 2022. The OECD cited the Omicron variant as one factor that could be a threat to recovery.
In addition, further restrictions could aggravate production chain bottlenecks and instigate further supply chain disruptions. This circumstance would undermine the strength of the expected recovery by preventing factories, ports and borders from fully re-opening, according to the OECD.
The OECD cut its forecasted increase in global GDP to 5.6% from its previous projection of 5.7% as made in September. The organization added that inflationary pressures are proving stronger and more persistent than was expected a few months ago, underlining the risk that continued supply disruptions — perhaps associated with further waves of COVID-19 infections — may result in prolonged and heightened inflationary pressure.
“The strong rebound we have seen is now easing and supply bottlenecks, rising inflation, and the continuing impact of the pandemic are clouding the horizon. The risks and uncertainties are large — as is being seen with the emergence of the Omicron variant — aggravating the imbalances and threatening the recovery,” OECD Secretary-General Mathias Cormann said in a statement. “Keeping the recovery strong and on track will entail addressing a number of imbalances, but above all it will mean managing the health crisis through better international coordination, improving health systems and massively stepping up vaccination programs worldwide.”
OECD chief economist Laurence Boone said that while governments acted swiftly and effectively during the height of the crisis — doing so to support both individuals as well as businesses — “the job is not finished.”
“The lack of global coordination on vaccine deployment is putting all of us at risk. It is crucial that lessons are learnt, that we invest in the future, by reviewing healthcare systems, investing in infrastructure, helping children catch up their missing months of schooling, and by putting ambitious strategies in place to help train people for the jobs that are needed in a changing world,” she said.
On Nov. 30, Federal Reserve Chair Jerome Powell also said that the Omicron variant poses increased uncertainty concerning inflation.
“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,” Powell said in remarks before Congress. “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.”
The World Health Organization (WHO) has labeled the Omicron variant a “virus of concern” (VOC), as preliminary evidence suggests an increased risk of reinfection regarding this variant as compared to other VOCs, per a statement. The new variant was first reported by the WHO as originating from South Africa — the news coming on Nov. 24 — and has since been detected in several other countries.
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