Visible damage to the global real economy such as travel and eating out due to the spread of Omicron
“The possibility of a total lockdown is small, so the economic damage may not be serious.”
(Seoul = Yonhap News) Reporter Jung-mo Koo, Yoon-gu Kim = As Omicron, a new variant of the novel coronavirus infection (COVID-19), spreads, the real economy is showing signs of serious damage mainly in the travel, aviation and restaurant industries.
However, as countries have already experienced the COVID-19 pandemic (global pandemic) and delta mutation last year and this year, there is also a forecast that the impact of the omicron mutation on the global economy will not be so severe.
◇ Reduced flight reservations and postponed/cancelled conferences, etc.
Omicron mutations have begun to take a toll on the travel, aviation, and event industries of each country.
Airlines are warning of a reduction in bookings, and European business executives are cutting travel plans, the Wall Street Journal reported on the 30th (local time).
British low-cost airline EasyJet says customers are delaying their travel plans.
EasyJet originally planned to reduce the number of flights in the fourth quarter to 70% of the 2019 level before COVID-19, but recently lowered it back to 65%.
“There is uncertainty right now and we need more certainty about the effectiveness of existing vaccines,” said Johan Lundgren, CEO of EasyJet.
The United States, the United Kingdom, and the European Union (EU) have blocked flights from South Africa, where the mutation was first discovered, in order to block the transmission of the Omicron mutation, while Israel and Japan have banned all foreigners from entering the country. The UK and other countries have tightened restrictions on inbound travelers.
As a result, companies are canceling or delaying travel plans. Switzerland-based Nestlé, whose chief financial officer was planning to travel to London, UK this week, canceled the schedule after the UK announced measures to quarantine people entering the country until they test negative for COVID-19. Switzerland is also currently requiring people entering the country to quarantine for 10 days.
Various events such as conferences, banquets, and Christmas markets have also been postponed or canceled in recent days.
As a result, hotels, restaurants, and pubs frequented by business travelers are also being affected by a decrease in sales.
On the other hand, there is a forecast that the spending patterns of consumers this Christmas season will change due to the mutation of the micron.
National Retail Federation (NRF) chief executive Matt Shay said the Omicron will increase consumption of home electronics, toys and clothing rather than travel or movie tickets that require an outing, CNBC reported.
However, NRF maintained its previous forecast that retail sales for November to December would reach $843.4 billion to $859 billion (about 997 trillion to 1115 trillion won), an increase of 8.5 to 10% compared to the previous year, despite the appearance of the micron mutation.
◇ “The risk of mutation in microns influences economic damage”
According to the WSJ, experts pointed out that the economic damage of omicron mutation depends on the risk of omicron mutation itself.
This is because, depending on how fast the propagation speed of Omicron is and how high the fatality rate is, the strength of each government’s response can vary.
Worst of all, governments around the world take measures such as closing borders and issuing stay-at-home orders. During the COVID-19 pandemic last year, the global economy recorded a negative growth rate as consumption and production activity contracted due to such a total lockdown.
However, given the active vaccination against COVID-19 in developed countries, public opposition to such restrictions, and no specific information on the new mutation, the possibility of governments in each country issuing a full lockdown is expected to be small for now. do.
Neil Shearing, chief economist at Capital Economics, said: “Most of the economic damage stems from the restrictions we have imposed in response to COVID-19. The key question is how much burden it puts on the system.”
On the supply side, if the avoidance of face-to-face contact becomes severe due to concerns about infection, the utilization rate of the plant may drop. This could lead to an imbalance between the supply and demand of goods and further aggravate inflation.
Federal Reserve Chairman Jerome Powell also expressed concern that the Omicron mutation could discourage people from working face-to-face, slowing labor market progress and adding to supply chain disruption.
However, the spread of omicron mutation may reduce consumption demand such as travel and eating out, and energy prices, which have been on a high rise recently, may also fall due to a decrease in demand, so there is a possibility that inflation will be suppressed overall.
It will be interesting to see what decision the Fed will make at the Federal Open Market Committee (FOMC) on the 14th-15th of this month. This is because it is possible to confirm whether the fear of a slowdown in the economic recovery that the omicron mutation will cause and inflation is more important.
The Fed appears to be putting more weight on the risk of inflation for now.
Chairman Powell has been saying inflation is ‘transitory’, but he told the US Congress on the 30th that “now is probably a good time to explain more clearly what we mean without using the word.” withdrew its position.
He also said, “I think we should discuss whether it is appropriate to end the tapering of asset purchases a few months earlier.”
pseudojm@yna.co.kr
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