Omicron could cause significant problems for the global economy.
From Malaysia to the United States and from Australia to India, more countries have reported their first cases of the latest Coronavirus variant – Omicron. However, chances are the variant has already spread domestically by the time those countries announced the first case. For example, New York City reported five cases just hours after infections were reported in Minnesota and Colorado.
Even Hawaii reported its first case of Omicron on Thursday, just a day after the US detected its first infection of the variant in San Francisco. The problem is, while the country’s first case in California was traceable to a resident who had just returned from South Africa, the cases reported in New York were not imported case or have no direct link to South Africa.
Likewise, the first case in Malaysia was identified in a 19-year-old woman who had arrived from South Africa via Singapore on Nov 19. But the World Health Organisation (WHO) announced Omicron as a variant of concern only on Nov 26. The Malaysian government, in turn, imposed travel restrictions on travellers from eight “high-risk” countries only two days ago (Dec 1).
And Malaysia only detected the first case on Thursday (Dec 2). That means the Omicron would have already spread beyond imagination during the 13-day gap in Malaysia, even though Health Minister Khairy Jamaluddin claims that a comprehensive contact tracing has been done. Like it or not, there are more cases of Omicron that the authorities may have missed for obvious reason.
Omicron has now been identified in 38 countries, up from 23 two days ago, confirming earlier suspicions that the variant was highly infectious. A preliminary study by South African scientists says the variant is at least three times more likely to cause re-infections compared to Delta variant. Cases so far have shown that Omicron could infect both vaccinated and unvaccinated people.
It’s still too early to understand the severity of disease caused by Omicron. Some have prematurely concluded that the new variant isn’t a big deal because first cases only show mild symptoms. But similar mild cases were also seen initially with the Alpha and Delta variants. If indeed Omicron could cause a more severe disease, it would take two weeks to see increased mortality.
It didn’t help that people tested positive for Omicron around the world involved healthy and young travellers, which could explain why the symptoms reported so far are mild. The good news is, unlike the previous wave when the Delta began, the explosion of Omicron started at a time when the vaccination rate is higher. Hence, people are generally more protected against Omicron than against Delta previously.
While there haven’t been any cases of fatalities due to Omicron, the impact on the economy has already begun. The global stock markets, commodities, oil prices, and even bitcoin have all taken a beating. Treasury Secretary Janet Yellen has warned that the latest Coronavirus variant could cause “significant problems” for the global economy.
Of course, the first sector that is affected is tourism, thanks to international travel bans imposed by countries spooked by the variant that was first discovered in South Africa. From shopping districts in Japan to ski resorts in the Alps, the tourism industry that was trying to find its footing after nearly two years of devastation brought by the Covid-19 pandemic is now being rattled once again.
It’s hard to plan for a vacation when it’s unknown if there would be any lockdown in the next couple of days, let alone weeks or months. Israel has already shut down its borders to all foreign tourists, as did Japan. Countries and governments that were previously slow to react to the first wave of Covid-19 have learned their lesson and are not interested to repeat their past mistakes.
Australia announced that it would defer plans to allow migrants and international students into the country. The Philippines has barred arrivals from seven European countries, including the Netherlands, Belgium, and Italy. Thailand’s tourism continues to be crippled as it struggles with 106,117 foreign tourists in the first 10 months of 2021, compared with 40 million before the pandemic.
Stock prices related to airlines and hotel chains, as well as oil, were being dumped the moment Moderna dropped the bombshell and warned that existing Covid-19 vaccines will be much less effective at tackling Omicron than earlier strains, including Delta. Worse, the vaccine maker said it could take months to develop and ship a new vaccine that specifically targets the Omicron variant.
The spread of Omicron is also creating fear to free movement at home, jeopardizing domestic tourism and consumption. For example, in order to fight surging infections, Europe was curbing many domestic activities even before the new variant arrived. With the arrival of Omicron, unvaccinated citizens were practically banned and locked down, as can be seen in Germany.
As governments impose more rules and make life more difficult for unvaccinated people, the recovery of service industries – from hospitality to conferences – is seriously affected. The latest highly infectious variant could also raise the already high inflation. As consumers’ demand for goods and products jumps, the supply chains could not cope up due to lack of workers or raw materials.
The cost of shipping a container from the factories of Asia to America remains extraordinarily high. If Omicron becomes deadlier than anticipated, it could trigger more lockdowns again in manufacturing countries like Malaysia and Vietnam, which are still struggling to boost its output, leading to more supply constraints and in the process push up wages unnecessarily.
If Omicron turns out to be more transmissible than Delta, the world economy could be in trouble if China – the world’s largest factory – is forced to shut down temporarily to hunt down the variant, disrupting supply chains. While China’s zero-Covid policy is still the best way to protect it against Omicron, any new cases would see the country undergoes mass testing and lockdown to neutralize the infections.
China was the first country to impose restrictions to combat the pandemic and has come a long way in its goal to reach zero local transmissions. So far, it has done a great job and Beijing has no plans to abandon its strategy. People in the country do not seem to mind the continued strict anti-virus measures as long as they are kept safe. Essentially, it has no issue shutting down again.
More importantly, many governments realized the consequences of failing to curb the spread of the new variant. Governments, including former US president Trump, were booted after he underestimated the pandemic. Therefore, they will have no choice but to impose restrictions, if Omicron is proven to be more severe than expected, dealing a severe blow to the already fragile economic recovery. – Finance Twitter