Global growth will slow this year and a worst-case scenario is not ruled out under the effect of the Omicron variant, which is spreading like wildfire on all continents, accentuating labor shortages and logistical problems, warned World Bank Tuesday.
The institution has revised its forecast for global GDP growth for 2022 down by 0.2 point, to 4.1%, following 5.5% in 2021, also down 0.2 point compared to the estimate. last June.
But, according to different hypotheses, “Simultaneous economic disruption caused by Omicron might further reduce global growth this year, by 0.2 to 0.7 percentage points”, indicates the institution, which would drop growth 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 noticeable rebound in the second quarter”, she specifies.
“The Covid-19 continues to wreak havoc, especially among the population of poor countries”, lamented David Malpass, its chairman on a conference call, noting that there was a “disturbing reversal” in poverty reduction, improved nutrition and health.
He was also alarmed at the impact on education: “the proportion of 10-year-olds who cannot read a basic story has increased from 53% to 70% in low- and middle-income countries” .
Inflationary risks continue to worry
“The Omicron variant shows us once once more that the pandemic is still with us”, underlined for his part Ayhan Kose, head of forecasts of the World Bank.
He points out that this fourth wave has for the moment less restrictions than the initial wave of 2020. “And if the wave were to subside soon, the economic impact would be rather benign.”
Most “if the variant were to take hold, with the number of infections remaining high and putting pressure on health systems, then growth would be weaker”, he notes.
Because in such a scenario, labor shortages would increase, further disrupting global supply chains and fueling inflation. Faced with galloping inflation, the American central bank (Fed) might suddenly raise rates, which would increase the cost of borrowing for emerging countries, already subject to record debt.
The richest countries are not spared
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.
US growth has thus been revised down sharply for 2022 to 3.7% (-0.5 point) following 5.6% in 2021 (-1.2 point). And, “stubborn inflation and even faster monetary policy tightening might lead to weaker than expected growth.”
According to forecasts, European growth has also been revised downwards for 2022 to 4.2% following 5.2% in 2021. Faced with the risk of inflation, a possible rise in interest rates in the United States and in Europe might further dampen growth.
The International Monetary Fund (IMF) is due to release its own forecast on January 25.
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