OECD cuts global economic outlook amid omicron scare

Paris: The global recovery has lost momentum and is becoming increasingly uneven, the Organisation for Economic Cooperation and Development (OECD) said in its latest economic outlook Wednesday, adding that the emergence of the omicron variant could threaten recovery.

The 38-member body now expects global output to grow by 5.6 per cent this year, down 0.1 percentage point from its September outlook. It maintained its forecast of 4.5 per cent growth in 2022, however.   

 
“We are 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,” OECD Chief Economist Laurence Boone told reporters.

Boone called on policymakers to ensure that COVID vaccines are produced and deployed swiftly throughout the world, including booster doses, while stressing that logistics remained the biggest roadblock in the global vaccination drive.

Omicron risks
The emergence of the omicron variant coincides with global economic recovery losing some of its steam thanks to global supply chain disruptions, soaring consumer prices and rising COVID cases, especially in Europe.

While experts have mostly refrained from judging the economic implications of the new variant, governments have been swiftly reimposing travel restrictions in an effort to keep the virus at bay, threatening global recovery.

“In terms of forecasting, this [omicron] aggravates the risks we have already identified, whether it be tensions in supply chains, closed borders, health checks being reinforced,” Boone said.

“There could be two scenarios: One is that this is a variant like we have seen since the beginning of the pandemic. It’s going to be a tough winter. It pushes back the recovery but does not disrupt it. We will see more supply tensions and worsening global imbalances,” she said.

“Then there is another scenario that it’s worse and we will have to protect ourselves much better. In that case, demand could be hurt, but that could also bring down price pressure.”

Analysts at Oxford Economics said earlier this week if omicron became the dominant strain, it could shave off more than 2 percentage points from global output growth next year.