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Economists raise concern over Omicron

Lawrence Agcaoili - The Philippine Star
Economists raise concern over Omicron
Mapa,Cochrane and Ricafort
STAR / File

MANILA, Philippines — The emergence of a new COVID strain has raised a red flag after the World Health Organization (WHO) classified  Omicron  as a “variant of concern,” according to private economists.

ING Bank Manila senior economist Nicholas Mapa said the panic displayed in the last few days underscores how fragile the global recovery is and how susceptible the world can be to the worst-case scenario of   lockdowns and widespread economic paralysis.

“The anxiety highlights that we are clearly not out of the woods just yet as the current crop of vaccines may or may not be effective against the very mysterious Omicron variant,” Mapa said.

The Philippines emerged from the pandemic-induced recession with a back-to-back gross domestic product (GDP) growth of 12 percent in the second quarter and 7.1 percent in the third quarter.

“We can take comfort in the knowledge that the Philippines posted a remarkable 7.1 percent year-on-year growth in the third quarter despite the presence of the Delta strain. However the jury is still out on whether the economy can post such sterling numbers without the benefit of a low base from the previous year,” Mapa said.

Economic managers penned a GDP growth of four to five percent for 2021 and seven to nine percent for 2022.

According to Mapa, the government should close borders immediately to help limit the spread of a possibly more virulent or transmissible disease.

“The worst-case scenario is a potential return to hard lockdowns, and as experience shows, prevention is always less costly than the cure.  Of late, we’ve seen a widespread relaxing of curbs, which in turn has led to a widespread lowering of everyone’s guard as they see daily infections slide below 1,000,” Mapa said.

From a high of more than 26,000 per day in September, the number of confirmed daily COVID infections dropped to below 1,000. Confirmed COVID-19 cases in the country have breached 2.8 million with over 48,000 deaths.

“This (Omicron) may or may not lead to a resurgence of cases, but we do know that higher cases generally lead to slower economic output and a possible unwanted detour for our nascent recovery,” Mapa said.

Steven Cochrane, chief economist for Asia-Pacific at Moody’s Analytics, said in a commentary titled “Much to Learn About Omicron – Fast” the new variant adds new measures of uncertainty to the outlook for the global economy.

“Much will depend on its speed of transmission, virulence, associated rates of hospitalization and death, and also the effectiveness of vaccines and antiviral medications against it. It will be at least two more weeks before more will be known as scientists around the world build a better understanding of the new variant and as the severity of infections becomes clearer,” Cochrane said.

Cochrane said governments should respond by accelerating vaccination programs, noting that the Philippines, Hong Kong, India, Indonesia, Laos, Myanmar, Thailand and Vietnam have vaccinated less than 65 percent of their population.

“Already, travel and tourism is expected to be one of the slowest components of the APAC economic recovery. Much of Southeast Asia, particularly the Philippines and Thailand, depend highly on travel and tourism  industry for growth,” Cochrane said.

Likewise, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the Omicron variant could potentially slow down further re-opening of the economy, especially in terms of allowing the resumption of foreign tourism in the country and in the rest of the world, as well as the possible delay in further easing the restrictions for returning overseas Filipino workers (OFWs).

“The Omicron variant could also have an adverse impact on the movement of OFWs and other migrants worldwide, in view of travel restrictions especially in countries already with cases of the Omicron variant, which could also potentially add to the global supply chain disruptions in terms of production and shipments,” Ricafort said.

However, Ricafort pointed out the impact of the latest COVID variant could be cushioned by the increased vaccination in the country toward population protection as early as the end of 2021 or by early 2022.

COVID-19 WHO
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