IMF Gives New Warning About Omicron, What’s Up?

Jakarta, CNBC Indonesia – IMF boss Kristalina Georgieva warned that the new Omicron variant of Covid-19 could slow the global economic recovery, as happened with the Delta variant.

“A new variant that may spread very quickly could undermine confidence and possibly some downside to global growth projections,” he said Reuters, Sunday (5/12/2021).

In its most recent World Economic Outlook, the fund projects global growth of 5.9% this year and 4.9% in 2022. However, the United States and other major economies experienced sharp downward revisions after the spread of the Delta variant and caused some friction.

“Even before the arrival of this new variant, we were concerned that the recovery, while it continued, was losing momentum, and noted that policymakers are now dealing with new issues such as inflation,” the IMF chief said.

The IMF’s latest forecast raises concerns that global supply chain problems and uneven distribution of vaccines are slowing the rebound and causing some countries to fall behind. The surge in demand in many developed countries coupled with shortages of key components such as semiconductors have triggered a wave of price hikes.

Less than two months ago, Georgieva expressed confidence that inflation would not be a “runaway train” but on Friday said the US Federal Reserve should raise interest rates in 2022, rather than in 2023, as the IMF had previously predicted.

The Fed, which cut lending rates to zero in the early days of the pandemic, has already begun to pull back on its stimulus measures and has signaled it will speed up the process, which would put it in a position to raise rates to zero by mid-year.

“We believe that the path to a policy rate hike could go more quickly,” said Georgieva.

Omicron has spread rapidly to at least 40 countries since it was first reported in South Africa last week, officials said, and many governments have tightened travel rules to try to contain it.

There’s still a lot we don’t know about Omicron. Researchers say the virus could have picked up genetic material from another virus, possibly the one that causes the common cold, which would make it easier to evade the defenses of the human immune system.

[Gambas:Video CNBC]

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