Omicron: the four possible economic scenarios linked to the new variant
Before knowing the real danger posed by the famous “Omicron variant” it will take at least a fortnight. In the meantime, hypotheses can be made about what the subsequent economic and political evolution scenarios will be.
Goldman Sachs has hypothesized four different economic scenarios depending on the different evolution of the new variant, and they seem to us rather logical alternatives.
1. Negative scenario : Omicron transmits faster than Delta and evades immunity from previous vaccines and infections. In this case, Omicron eliminates Delta as the dominant strain, as well as "evading immunity against hospitalization only slightly more than Delta and causing an equally severe disease." Regarding the economic impact, it would result in another major wave of infections in the first quarter in various economies, resulting in global growth slowing to an annual rate of 2% quarter over quarter, – 2.5 percentage points below the Goldman's current predictions. It would be a worldwide problem, with a fall in energy prices, but stagflation on goods. Politically, it would put many governments under tension.
2. “Very severe” scenario: This less likely scenario would see both disease severity and immunity against hospital admissions substantially worse than Delta and would have a worse economic impact than the first scenario. The economic impact would obviously be worse, while "The impact of net headline inflation is again ambiguous, although the movements in energy and service inflation (down) and in goods inflation (up) are greater" . A 2020-style situation, worsened. Politically, some governments would be strongly contested.
3. False Alarm Scenario : Omicron is nothing more than a bluff and spreads slower than Delta. It has no significant effect on global growth and inflation. In this scenario, the sharp increase in Omicron cases reported in Gauteng may reflect biased sequencing, other data collection issues, or superspreading events. Finally, any Omicron ability to outperform Delta's competition in South Africa does not necessarily relocate to other geographies with higher vaccination rates / lower previous infection rates. In this case the situation remains the current one.
4. Positive scenario: In this case Omicron is slightly more transmissible than Delta but causes much less severe disease. This speculative “normalization” scenario would result in a net reduction in the burden of disease across various health systems, leaving higher growth than Goldman's baseline. In this scenario, inflation is likely to fall faster than the baseline scenario due to a rebalancing of demand from goods to services, coupled with an accelerated recovery in goods and labor supply.
Obviously the alternatives are very different, and, for a couple of weeks or so, we won't know which of these alternatives will be the most correct. In general, however, it is too early to wrap one's head, and the variable now widespread in Europe is the old Delta.
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The article Omicron: the four possible economic scenarios linked to the new variant comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/omicron-i-quattro-possibili-scenari-economici-legati-alla-nuova-variante/ on Tue, 30 Nov 2021 08:00:33 +0000.