Economists are slashing their growth forecasts for next year due to the Omicron variant of COVID-19.
According to The Wall Street Journal, Moody’s Analytics chief economist Mark Zandi downgraded his first-quarter GDP prediction for the United States from 5.2% to 2.2%, as he “can see the economic damage mounting going into the first quarter.” He noted reductions in travel spending, as well as the cancellation of arts and entertainment events.
Pantheon Macroeconomics likewise cut its forecast for annualized American GDP growth from 5% to 3% in the first quarter of 2022. Meanwhile, other analysts are keeping a close eye on Omicron before amending their predictions.
“It’s unfortunate [the Omicron variant] had to break out during the holiday season, even in places like New York City, where people are highly vaccinated,” Barclays economist Pooja Sriram told The Wall Street Journal. “We see some kind of voluntary social distancing if people start canceling travel plans and become hesitant about using accommodation, that will have an effect on growth and employment.”
In reaction to Omicron — which appears to have less severe symptoms than earlier COVID-19 variants — hedge fund manager Bill Ackman advised Americans to stop living in “fear of COVID.”
“We have reached the stage in the Covid crisis where our attention needs to focus on severity and protecting those who are vulnerable rather than case counts,” Ackman said. “While unvaccinated Americans are still at risk, the vax decision is a personal one. We need to give the healthcare system the resources it needs, and we need to start living again.”
“It appears that Omicron will ‘vaccinate’ everyone who isn’t already vaccinated. Let’s protect the vulnerable and continue to live our lives. The beginning of the end of living in fear of Covid is near,” Ackman added in a follow-up tweet.
Beyond the United States, Omicron is inspiring Western leaders to tighten COVID-19 restrictions — leading their economies to undergo contractions. As CNN Business reported about Germany:
Europe’s largest economy will shrink 0.5% in the fourth quarter of this year, compared with the third, and stagnate in the first three months of 2022, according to projections published Tuesday by the Ifo Institute for Economic Research. An economy is in recession when it contracts for two consecutive quarters…
Growth is expected to pick up next summer as a wave of coronavirus cases subsides and supply bottlenecks ease, but the slow start to the year will cost the manufacturing powerhouse. Ifo slashed its growth forecast for 2022 by 1.4 percentage points to 3.7%.
Ifo expects inflation to increase by 3.1% this year and 3.3% in 2022, rates that far exceed the European Central Bank’s target of 2%. Consumer prices are not expected to return to normal until 2023, according to Ifo.
Over the weekend and into Monday, Omicron was at least partially responsible for a surge in flight cancellations — which The Daily Mail called a “Christmas Flightmare.” Nearly 1,000 flights either entering or leaving the United States were canceled on Christmas Day alone.
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