Goldman Sachs economists pose four scenarios about the possible impact on global economic growth of the Omicron variant of the coronavirus, although they acknowledge that it is too early to adjust their forecasts, as it is not yet clear which is the most likely to materialize.
First, Goldman speaks of a “Negative Scenario”. In it, Omicron transmits faster than its predecessor, the Delta variant. This will slow global growth in the first quarter to an annual rate of 2% qoq, which is about 2.5 percentage points below Goldman’s current forecast.
For the whole of 2022, the world economy continues to expand by 4.2%, around 0.4 percentage points below the current forecast, while the inflation outlook is “ambiguous”.
A second scenario includes “Serious Disadvantages”. In this situation, both the severity of the disease and the hospitalizations are substantially worse than those registered with the Delta variant. In this context, global economic growth takes a more substantial hit, while “the impact of inflation is again ambiguous.”
On the other hand, Goldman also poses a scenario of “False alarm”, where the Omicron variant spreads more slowly than the Delta and does not have a significant effect on global growth and inflation.
The last scenario, is a panorama “Bullish”. Goldman thus speaks of an Omicron variant that is slightly more transmissible, but causes much less serious disease. In this speculative “normalization” scenario, a net reduction in the burden of disease increases global growth of what the bank raises in its projections. Inflation is likely to be lower as the rebalancing of demand and the recovery in the supply of goods and labor accelerates.
The bank has decided not to alter its growth projections for the time being due to a possible false alarm
“The result is that the Omicron variant could have considerable effects on growth, but that the range of medical and therefore economic outcomes still unusually wide“acknowledge Goldman economists led by Jan Hatzius, in an analysis distributed this week among their clients.
Hatzius and his team assure that considering this and the possibility of a “false alarm”, the bank has decided not to alter its growth, inflation and monetary policy projections for the time being until the impact of the new variant is somewhat clearer. .
Powell will accelerate the withdrawal of stimuli because inflation is no longer transitory
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