World economy faces double concerns amid appearance of Omicron variant

Sunday, 2021-11-28 14:56:08
 Font Size:     |        Print

O.R. Tambo International Airport in Johannesburg, South Africa announced the cancellation of flights on November 26 after the appearance of the Omicron variant. (Photo: Reuters).
 Font Size:     |  

NDO - The destructive power of infections from the COVID-19 pandemic is putting the world economy at risk of serious instability due to high inflation. While governments and central banks are still struggling with the problem of anti-pandemic and economic recovery, a new variant of the SARS-CoV-2 virus has appeared and is expected to deal another heavy blow to the global economy.

Inflation control has become a top concern in many countries around the world as commodity prices have skyrocketed in the recent days. The European Union (EU) has witnessed an inflation rate exceeding 3%, while in the US, commodity prices in October increased by more than 6%.

Inflation has become a big concern for Germany when the German Central Bank, Bundesbank, reported that inflation continued to rise in November and approached 6% - the highest level since 1992. Bundesbank warned that economic turmoil caused by the COVID-19 pandemic, supply chain disruptions and increasing numbers of new infections everywhere, are creating a larger impact on the economy in the end of this year.

Meanwhile, in Canada, during a meeting on November 26 with Finance Minister Chrystia Freeland, economists expressed concerns about inflation and the size of the federal government’s spending. According to a report from Canada’s Department of Finance, the federal budgets deficit stood at 68.6 billion CAD within the 2021-2022 fiscal year. Experts warned of the risk for increasing budget deficits because of spending to combat the COVID-19 pandemic and recommended measures to keep inflation within the range of 1-3% per year.

In Asia, the “ghost of inflation” is also threatening to destabilise the economy. In China, there were times witnessing a shortage of goods and the prices of some essential items increased sharply.

In the Republic of Korea, consumer inflation back in October rose by 3.2% year-on-year, the fastest increase since January 2012. In an effort to control inflation, the Bank of Korea decided to raise the basic interest rate by 0.25%.

However, “misfortunes never come in singly” when a new variant B.1.1.529 of the SARS-CoV-2 virus (also known as Omicron) has appeared in recent days, threatening to disrupt the global supply chain and reverse the prospects of anti-pandemic and economic recovery in many countries.

Faced with the risk of the new variant spreading, a number of countries have imposed travel restrictions. Due to the appearance of variant B.1.1.529, Asian and European stock markets witnessed a dark day on November 26 when stock indexes simultaneously plunged.

The fact shows that countries around the globe continue to face “double concerns”, including the fight against inflation and the battle against the COVID-19 pandemic with a stronger and more dangerous “enemy”. The success or failure of current economic recovery plans no longer depends solely on the “financial drugs” of central banks, but more on how each country responds to the COVID-19 pandemic.