Near-Term Weakness
Omicron was a major topic at the BNP Paribas 2022 Global Outlook virtual press event on Tuesday. BNP Chief Global Economist Luigi Speranza said Tuesday that the emergence of a new COVID variant does not significantly change the firm’s bullish medium-term outlook for the global economy.“Our bias overall is to think recent developments are a net negative for growth but more ambiguous for inflation,” Speranza said.
“The extent of the impact will depend on the transmissibility, virulence and—crucially—the ability of the omicron variant to evade vaccines, which will not be known for at least a couple of weeks.”
As a result, Speranza said it will likely be unlikely investors will see a return to recent highs for risk assets in the near-term, and a worst-case scenario of a major global health emergency would obviously be a disaster for investors.
Numbers
Finally, Speranza said past outbreaks suggest it’s unlikely the world will be able to prevent circulation of the new variant at this point. Case numbers typically represent a rear-view mirror of the outbreak, and Speranza said even a prompt and aggressive response will likely not keep omicron in check.“We therefore assume that the new variant is likely already sufficiently widespread to represent a global issue in the coming weeks,” he said.
Brusuelas’ Take
BNP isn’t the only firm weighing the potential impact of omicron. Joseph Brusuelas, chief economist for RSM US LLP, said this week that he is still projecting at least 4 percent U.S. GDP growth in 2022 and an unemployment rate of just 3.5 percent.“All of this will happen as inflation slowly recedes from what we think will be a peak near 7 percent in 2021 to roughly 3 percent at the end of 2022, setting the stage for tighter monetary policy and a path back toward 2.5 percent growth in 2023,” Brusuelas wrote.
“While there is likely a wide range of possible outcomes linked to the omicron variant, we do not see a need to alter our growth forecast of 7.2 percent in the fourth quarter nor the rate for 2022.”