The global economy has taken another hit from the Omicron variant of the virus that has caused a raft of new travel restrictions, just as it was recovering from the body blow of the COVID 19 pandemic.
The new strain has spread rapidly from Africa to the Pacific, and from Europe to Canada, causing dozens of countries to announce travel restrictions, first reported to the World Health Organization in South Africa less than a week ago.
The economic impact will depend on how dangerous the variant proves to be, and how well existing vaccines stand up to it.
Even with the most favorable scenarios in mind, economists are already revising their 2022 forecasts.
The International Monetary Fund, which expects growth of 4.9 per cent for the next year, insists for months that the coronaviruses and its variants remain the main threat.
The economic impact could be modest, in the order of 0.25 percentage points on global growth in 2022, if Omicron causes mild symptoms and the vaccines are effective, said Gregory Daco, chief economist at Oxford Economics.
In the worst-case scenario, in which Omicron proves extremely dangerous and large swaths of the world are in lock down again, growth could fall to around 2.3 per cent in 2022, as compared to the 4.5 per cent expected by Oxford Economics before the variant emerged.
In such a scenario, it is not certain whether governments, which have stumped up trillions of dollars in aid since the outbreak, would be willing to put in place further fiscal stimulus packages, especially if vaccines are available, Daco said.
Erik Lundh, an economist at The Conference Board, said that those aspects are going to be the key to how it affects the global economy and people's behavior.