Last week was dominated, among other things, by the B.1.1.529 virus or the Omnicron virus, which apparently has its origins in the Southern part of Africa. How bad is it and will it hit growth?
What is a mutated virus?
One of the concerns over this virus is that it is a mutated virus. It means that the virus adapts itself quickly to the conditions and hence does not give time for the immune system to build solid defences. That would mean that even fully vaccinated persons may be at risk. However, the WHO is yet to confirm on that. As per early reports, this is one of the most lethal variants of the COVID virus, but we have to wait for a total confirmation from WHO on this subject.
Responses have started to come
One of the principles that most nations adopted during COVID is that “When in doubt, just ban”. UK has already banned flights and travel from 6 African nations. Most of the European nations as well as Singapore, Hong Kong and Israel have come up with a list of stringent norms for any inbound travel from the affected regions. As of now, the view is still quite ambivalent on whether the vaccinated have an edge over others or not. But, with the experience of the first two rounds of COVID, no country is really taking any chances. These restrictions resulted in a sharp fall in equity markets and also led to a 13% crash in crude oil.
Will it hit economic growth?
Frankly, the world economy cannot really afford another disruption in the flow of economic activity. Already, the lag effect of COVID 1 and 2 have left the world economy with huge supply side constraints on metals, alloys and semiconductors. The restrictions will hit the flow of trade and worsen these supply side constraints. The bigger worry is that demand has been just about picking up and most emerging markets do not have the political will or the economic muscle to undertake one more round of economic stimulus. In a sense, the impact of the virus on growth would largely predicate on how the virus threat is handled in the initial days.
Use the experience stack
The 2 years of battling COVID has given nations enough of skills to handle the crisis in a more organized manner. The best way is to tighten the transport and travel flows before this becomes a full-fledged third round of pandemic. One advantage is that majority of the adult population is dual vaccinated and would have built up enough anti-bodies. It makes a lot more sense to pay the price in the short run rather than risk damage in the long run. This applies to India too. It may sound strenuous, but sooner they undertake isolation of specific travellers and map their contacts, the better it is. At 6.9% fiscal deficit, you really do not have too much room!