AUS
NZ
UK
CA
USA
IND
Highlights
- IMF expects Omicron to cost the global economy an additional AU$7 trillion.
- It comes at a time when global central banks don't have enough room to keep monetary policies very loose.
- Omicron has posed serious challenges to the global economy ever since it was first reported in South Africa and Hong Kong in November.
The International Monetary Fund (IMF) has warned that the COVID-19 pandemic could turn out to be far more costly than estimated. The latest coronavirus variant Omicron could cost the global economy an additional US$5.3 trillion (AU$7.4 trillion) on top of the current projected loss of US$12.5 trillion (AU$17.5 trillion), said IMF Chief Economist, Gita Gopinath, at an event organised by the World Health Organization (WHO) on Thursday.
It would be a whammy for the global economy as central banks currently don't have enough room to keep monetary policy very loose and interest rates low, added Gopinath. In addition, the steadily building inflationary pressure is also posing a threat.
"And, so think of a situation where you could have this pandemic last longer, you have longer supply disruptions that are putting inflationary pressures, and then we have the real risk of something we have avoided so far, which are stagflationary concerns," Gopinath noted.
Image source: Nhemz, Shutterstock
The Omicron variant has posed serious challenges to the global economy ever since it was reported in South Africa and Hong Kong in November. According to the WHO, Omicron has since been reported by 57 countries.
IMF likely to downgrade growth estimates
Meanwhile, the IMF is expected to lower its global economic growth estimates due to Omicron. Speaking at a conference recently, IMF’s Managing Director Kristalina Georgieva said that the new variant might spread very rapidly and dent global confidence, resulting in some downgrades of the October projections for global growth.
Meanwhile, over 264 million people have been reportedly infected by coronavirus since it was first detected in central China in late 2019 and 5.49 million people have died, according to a Reuters report. Cases in Europe, the pandemic's current epicentre, have surpassed the 75-million mark.
Goldman cuts US economy forecasts
Earlier in the month, global brokerage firm, Goldman Sachs Group, cut its forecasts for the US economy this year amid the ongoing spread of the omicron strain. It now expects the US gross domestic product (GDP) to expand 3.8% this year, down from 4.2%. It reduced its 2022 estimate to 2.9% from 3.3%.
RELATED ARTICLE: US stocks slip after Omicron restrictions, jobs data
RELATED ARTICLE: Is the RBA's latest cash rate decision justified?
RELATED ARTICLE: 5 money saving ideas for this Christmas shopping
