Daily Management Review

Rating Agencies Warn Of Risks To Global Economic Recovery Posed By Omicron Covid-19 Variant


After the World Health Organization declared the Omicron Covid-19 variant held a very high risk of infection increases, rating agencies Fitch Ratings and Moody's Investors Service cautioned that the variety might damage global economic prospects while also pushing costs higher.
"The Omicron variant poses risks to global growth and inflation, especially as it comes during a period of already stretched supply chains, elevated inflation and labor market shortages," Elena Duggar, Associate Managing Director at Moody's, told Reuters in emailed comments.
Duggar said that demand during the forthcoming holiday travel and spending season is likely to get hit by the variant.
"If the new variant affects global market risk appetite, it would cause further financial stress for debt issuers with large financing needs. For example, emerging market countries that rely on international market borrowing may face heightened refinancing risks", she said.
In a separate statement, Fitch Ratings said that it was too early to factor the consequences of the Omicron coronavirus variation into its economic growth estimates until additional information regarding the virus's transmissibility and severity were available.
"We currently believe that another large, synchronized global downturn, such as that seen in the first half of 2020, is highly unlikely but the rise in inflation will complicate macroeconomic responses if the new variant takes hold," Fitch said.
On Monday, more countries blocked their borders, casting doubt on the global economy's ability to rebound from the two-year epidemic. Industry insiders stated that big airlines responded quickly to safeguard their hubs by restricting passenger travel from southern Africa, anticipating that a spread of the new type would result in limitations from destinations outside the immediate impacted regions. find out more
US President Joe Biden advised Americans not to be alarmed and stated that the US was working with pharmaceutical firms to develop contingency plans in the event that new vaccinations were required.
This winter, Biden said, the country will not go back to lockdowns, but he urged people to be vaccinated, get boosters, and wear masks.
It's too early to determine if the version produced more severe symptoms than prior variants, but it does appear to be more transmissible, according to an infectious disease expert from South Africa, where scientists initially discovered Omicron.
The spread of the Omicron variation may be difficult to control, even with some limits on international travel, according to Duggar's experience with previous versions.
"Should the new variant lead to another rising wave of COVID infections, the hardest-hit economies will be those with lower vaccination rates, higher dependence on tourism and lower capacity to offer fiscal and monetary policy support to offset the growth impact of the new wave of infections."