‘Omicron impact shorter, less severe than Delta’

Lawrence Agcaoili - The Philippine Star
âOmicron impact shorter, less severe than Deltaâ
Commuters wait for public utility buses along Commonwealth Avenue in Quezon City as the full implementation of the "no vaccine, no ride" policy begins on Monday, Jan. 17, 2021.
The STAR / Walter Bollozos

MANILA, Philippines — The impact of the highly contagious Omicron variant on the economy is shorter and less severe than the Delta wave that led to the surge in COVID infections last year, according to Moody’s Analytics.

Steve Cochrane, chief economist for Asia-Pacific at Moody’s Analytics, said the steep surges of cases driven by Omicron are evident in the Philippines and Australia.

Cochrane said risks are rising again in the current quarter as the Omicron variant has slowed economic growth in the US and Europe, but the impact on spending and production are expected to ease later this month.

However, he pointed out the Omicron wave lags the declining pattern in Asia- Pacific, setting up near-term risks to the regional economy.

“But the pattern of rapid rise and an equally rapid fall of Omicron’s wave elsewhere illustrates that any impact in Asia-Pacific will also be of shorter duration and less severity than the Delta wave of last year’s third quarter,” he said.

Cochrane said movement restrictions have been heightened once again in the Philippines and Australia, resulting in potential disruptions of supply chains.

“Domestic demand would be hurt first by any return to movement restrictions, and Google Mobility data indicate that this is beginning to be felt in the Philippines and in Thailand, where declines in mobility for retail and recreational purposes have fallen the most sharply in mid-January,” he said.

The surge in COVID cases dominated by the Omicron variant after the Christmas and New Year holidays prompted the Philippines to place the National Capital Region (NCR) and several provinces under Alert Level 3 early this month.

Infections in the country almost hit an all-time high of 40,000 per day after falling below 300 last December.

“Risks of further domestic movement restrictions that could hobble near-term growth are focused in Indonesia and the Philippines, where public health services are less expansive and vaccination rates remain relatively low,” Cochrane said.

The Bangko Sentral ng Pilipinas (BSP) has committed to do whatever it takes to allow the recovery from the pandemic-induced recession gain more traction through an accommodative monetary policy stance.

The Monetary Board has kept interest rates at record lows for more than a year after delivering 200 basis points in rate cuts in 2020 that brought the benchmark rate to an all-time low of two percent.

According to Moody’s Analytics, inflation is also a risk as energy prices remain unsettled and the opening of domestic economies boosts demand for goods and services.

“Consumer price inflation has cooled somewhat in China and in the Philippines, and central banks around the region seem content to wait for an acceleration of growth and for the US Federal Reserve to make its first move,” Cochrane said.

After accelerating to 4.5 percent last year from 2.6 percent in 2020 due to rising global oil prices and elevated food prices, the BSP sees inflation easing to 3.4 percent this year after exceeding the two to four percent target last year.

“Policy itself shifts to the forefront with risks of over-aggressive monetary policy tightening or fiscal consolidation that could arise in the second half of this year. Stubbornly high inflation could result in faster-than-expected rate hikes around the region,” Cochrane said.


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