The Organisation for Economic Co-operation and Development (OECD) warned on December 1 that the Omicron coronavirus variant threatens the global economic recovery, as it lowered the growth outlook for 2021 and appealed for a swifter rollout of Covid vaccines.
The global economy is now expected to expand by 5.6 per cent this year, down from an earlier forecast of 5.7 per cent, the OECD said in its updated economic outlook which warns that low vaccination areas could create “breeding grounds” for deadlier virus mutations.
Its forecast for 2022 remains unchanged at 4.5 per cent, but the report was released only days after Omicron was detected.
“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 said at a press conference.
The report by the Paris-based organisation said the global recovery is continuing to progress, but warned that it “has lost momentum and is becoming increasingly imbalanced”.
While the OECD said it was “cautiously optimistic” about the recovery, it warned that health, high inflation, supply chain bottlenecks, and potential policy missteps are “all key concerns”.
“The top policy priority remains the need to ensure that vaccines are produced and deployed as quickly as possible throughout the world, including booster doses,” the OECD said.
In the “more benign scenarios”, outbreaks could continue to prompt restrictions on people’s movements, which could have long-lasting consequences on labour markets, production capacity and prices.
“The harshest scenario is that pockets of low vaccination end up as breeding grounds for deadlier strains of the virus, which go on to damage lives and livelihoods,” Boone warned in an editorial in the report.
The report does not take into account the possible impact of the Omicron variant.
Analysts at Oxford Economics say the new strain could shave 0.25 percentage points off global growth next year if it causes mild effects, but it would cost two percentage points if it is more dangerous and a large part of the global population was forced into lockdowns.