Omicron's impact to depend on restrictions, policy support: Moody's

As several countries imposed new travel restrictions in recent days, these will likely increase over the coming weeks until scientists learn more about the variant, it said.

Continued progress in global vaccination efforts and public compliance with the use of tools such as masks and social distancing will be important factors in determining the economic impact of the new variant. “Countries with an assured supply of effective vaccines and delivery systems, and high levels of vaccine acceptance by the public, will remain better positioned,” Moody’s was quoted as saying by a news agency.

The US-based rating agency said European countries including the United Kingdom, Germany, France, the Netherlands and Belgium have detected Omicron cases, prompting new travel curbs. Moreover, the restrictions imposed following a recent rise in Delta infections could now be further extended and expanded.

China’s zero-tolerance COVID-19 policy will further delay relaxation of rules surrounding international travel in the face of the Omicron variant. If the variant is discovered in the country, authorities likely will increase the severity of restrictions, it said.

“The economic impact on other emerging market countries will differ, and will depend on a mix of government restrictions, public comfort with social interactions, and the capacity of governments and central banks to provide additional policy support to the private sector, if needed. Emerging market countries facing travel bans, including South Africa, as well as those dependent on tourism revenue face further downside risks,” Moody’s said in a report.

Moody’s said the emergence of the new variant also comes during a period of fragile economic recovery, with stretched supply chains, elevated inflation and labor market shortages. Business disruption resulting from the spread of the new variant could prevent supply chain stresses from easing, dampening productive capacity and stoking further cost pressures in sectors with exposure to global supply chains.

On the demand side, fear of infection could prevent a large proportion of individuals from engaging in economic activity that requires close contact. Thus, demand could diminish for services ranging from hospitality to travel, at a time when holiday-related spending would usually ramp up, the rating agency added.

Fibre2Fashion News Desk (DS)