OECD warns Omicron may exacerbate supply shortages and inflation

The Omicron coronavirus variant has the potential to exacerbate the slowing growth and Contribute to inflation, The Organization for Economic Cooperation and Development (OECD) said in its latest forecast on Wednesday that in order to delay the return of the world economy to normal.

International organizations headquartered in Paris-based members of major wealthy nations warned that monetary policymakers should be “cautious” given the new strain of the virus, and that the most urgent need is to accelerate the deployment of the Covid vaccine.

These recommendations are accompanied by its twice-a-year economic outlook, which makes the global growth forecast similar to three months ago, but significantly raises expected inflation.

OECD chief economist Laurence Boone told the Financial Times that the variant of Omicron “increased the already high uncertainty, which could pose a threat to the recovery, delaying the return to normal or worse Things”.

She didn’t refute Jay Powell expressed a tough stance on Tuesday, The Chairman of the Federal Reserve or the Bank of England recently commented that these central banks have been very cautious. The inflationary pressures in the United States and the United Kingdom have become more persistent and require a slight tightening of monetary policy.

“There is no omnipotent [monetary] Policy, because in some emerging market economies with high inflation rates, the situation is very different.U.S. also Different from Europe It’s also different from Asia, where there are Much less inflation Question,” Boone said.

She emphasized that policymakers need to communicate clearly that they will not raise interest rates due to supply shortages, but if price pressures expand and strengthen themselves, they will be ready to take action.

The OECD pointed out that the global recovery in 2021 was much stronger than initially expected, but said it has now caused a series of devastating imbalances that may last longer than expected. “Supply shortages have the potential to slow growth and extend the time for inflation to rise,” Boone said.

In the automotive industry alone, the OECD has calculated that this year’s supply disruption has reduced the size of the German economy by more than 1.5%, and Mexico, the Czech Republic and Japan have also reduced by more than 0.5%.

In addition to this mismatch between supply and demand, the main message of the OECD is that there are many other serious imbalances in the global economy.

These include the supply of vaccines-much more in rich countries; the growing economic performance gap between advanced economies and emerging markets; and the gap between the performance of the labor market in European countries and the United States.

In Europe, employment is better protected and is now higher than before the pandemic, but economic output has not yet fully recovered the lost ground. In the United States, the situation is just the opposite.

Boone said that the protection of jobs in Europe is good for people, “but some necessary job redistribution may not have happened.” She also said that part of this important trend may be because the initial coronavirus attack in Europe was more severe than the United States.

The 2022 inflation forecast histogram (%) showing the OECD's 2022 inflation forecast for advanced economies has been revised up significantly

In the OECD’s economic forecast, it expects that world economic growth will slow from 5.5% this year to 4.5% in 2022, and then grow by 3.2% in 2023.

The inflation rate in G20 countries may rise from 3.8% in 2021 to 4.4% next year, and then fall to 3.8% in 2023. However, the OECD predicts that the inflation rate in the Eurozone will be less than 2% that year, compared with 2.4% in the UK and 2.5% in the US.

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