Global growth will slow this year and a worst-case scenario is not excluded under the effect of the Omicron variant, which is spreading like wildfire on all continents, accentuating labor shortages and logistical problems, warned Tuesday, January 11 the World Bank. The institution revised down its forecast for global GDP growth for 2022 by 0.2 points, to 4.1%, after 5.5% in 2021, also down 0.2 points from the estimate. of last June.
But, according to different hypotheses, “the simultaneous economic disruption caused by Omicron could further reduce global growth this year, by 0.2 to 0.7 percentage points”, the institution says, which would bring growth down to 3, 9% or even 3.4%. In this worst-case scenario, “most of the shock would be felt in the first quarter of 2022, followed by a notable rebound in the second quarter”, specifies the World Bank.
Different scenarios, depending on the importance of health restrictions
“The Omicron variant shows us once again that the pandemic is still with us and we must learn to live with it,” said Ayhan Kose, head of forecasts for the World Bank, during an interview with AFP.
He points out that this fourth wave is currently bringing fewer restrictions than the initial wave of 2020. “And if the wave were to subside soon, the economic impact would be rather benign,” he says. But “if the variant were to take hold, with the number of infections remaining high and pressurizing health systems, then growth would be weaker”, he adds.
Because in such a scenario, labor shortages would be more acute, further disrupting global supply chains and fueling inflation. Faced with galloping inflation, the American central bank (Fed) could suddenly raise rates, which would increase the cost of borrowing for emerging countries, which are already subject to record indebtedness.
In this context, business and household confidence is likely to erode. Ultimately, consumption and trade flows, the engine of global growth, are likely to slow further. For 2022, the World Bank has already revised down growth in the volume of world trade, to 5.8% (-0.5 points) after a rebound of 9.5% last year.
Vaccination, a key element
Ayhan Kose stresses that vaccination remains the key element. Because the threat of new, more transmissible or virulent variants will persist as long as a substantial part of the world’s population is not vaccinated.
“The share of the population vaccinated in many economies is expected to exceed 70% by mid-2022, but prospects for progress in immunization remain uncertain in a number of countries”, particularly poor countries, observes the World Bank .
At the current rate of vaccination, “only about a third of the population in low-income countries will have received even a single dose of vaccine by the end of 2023”, she laments in his report.
China and the United States are also at risk of a slowdown
The two leading powers in the world, the United States and China, engines of global growth, are not spared by the slowdown and the threat of Omicron, also notes the World Bank.
American growth has thus been revised down sharply for 2022 to 3.7% (-0.5 points) after 5.6% in 2021 (-1.2 points). The World Bank notes that the $1.2 trillion ten-year infrastructure spending plan, signed in November, “should provide only a small boost to economic activity in the short term, with most of its effects expected to produce beyond this year”.
And, “stubborn inflation and even more rapid monetary policy tightening could lead to weaker-than-expected growth.” Chinese growth is now estimated at 5.1% (-0.3 point) against 8% (-0.5 point) in 2021. It is decelerating “more than expected”, notes the institution.
“The possibility of a sharp and prolonged downturn in the heavily indebted real estate sector – and its potential effects on house prices, consumer spending and local government funding – poses a notable downside risk to the outlook” Chinese economy, concludes the Bank.
The International Monetary Fund (IMF) is due to release its own forecast on January 25.
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