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March 31, 2023

Omicron scenarios – from hope to dismay

Macro commentary by eToro analyst for Romania, Bogdan Maioreanu


The Omicron Covid variant throws a new scare to a world already tired of almost two years of pandemic. We are now in an uncertainty phase triggered by the rapid expansion of this variant in Africa and around the globe, by its over 30 mutations in the spike protein targeted by vaccines and the lack of data about how dangerous this variant is.

While markets are reacting cautiously to this new virus, various organizations are making different scenarios about future developments based on the little knowledge we have now.

A moderate scenario is the one in which the Omicron variant proves to be more transmissible but with people having similar or slightly worse immunity against hospitalization compared to the Delta variant. This scenario sees a possible decrease in growth for the first quarter of next year. It will depend a lot on the measures the governments will take to limit the spread of the disease. But the economies will continue their recovery.

The worst case scenario is that Omicron is more infectious and the immunity against hospitalization proves to be a lot worse than Delta. This is the scenario that takes the world back to the beginning of 2021 with all the lockdowns and restrictions. This will also warrant a steeper decrease in growth for Q1 2022, increased pressure on supply chains, production disruptions  and continued higher inflation due to demand not being able to be met. A possibility is that in this scenario to see again energy prices in steep decrease.

On the positive side we have a scenario where Omicron proves to be only more infectious and transmissible but with lower hospitalizations and death rates than Delta. In this scenario the economies will continue the return to normal, tapering will continue as planned and the world will continue to grow.

There is another scenario that looks like it is being disproved by the actual events is the one where Omicron spreads less aggressively than the Delta strain. By example, the Netherlands announced that it had confirmed the presence of the variant in Dutch test samples taken as early as Nov. 19 — well before South Africa first announced its detection last week. Experts believe it is already in wide circulation internationally in a shorter timespan than Delta.

The Organisation for Economic Co-operation and Development (OECD) sees mainly two scenarios facing the international economy as Omicron adds to the uncertainties in the recovery from the Covid-19 crisis. “One is where it creates more supply disruptions and prolongs higher inflation for longer. And one where it is more severe and we have to use more mobility restrictions, in which case demand could decline and inflation could actually recede much faster than what we have here,” Laurence Boone, the chief economist of the OECD, said.

If the Omicron turned out to be “more evil” than other variants, according to Boone, governments could be called upon to step in to cushion the blow for businesses and households. “That could be a scenario where we need more fiscal support at this stage,” she added.

Despite the early stages of the Omicron pandemic its apparition is already creating effects. Tourism and travel are affected by bans of certain African destinations, stricter testing and vaccination regulations are enforced, and all these could delay the travel industry’s recovery.  Before this, international trips were on the rise after 20 months of decrease.

Effects are already showing locally too. As an example, in the UK, pubs, restaurants and hotels owners across the country are warning they are already receiving cancellations of bookings for Christmas parties and events triggered by fears about the Omicron variant. This is a bad sign for the hospitality businesses that were hoping to welcome many customers during the crucial festive season. And this trend has the potential to spread all over the world.

One of the things that we do not know yet is how strong the protection offered by the existing vaccines against Omicron is. While researching this, Pfizer and Moderna already started working on vaccines tailored to stop Omicron. And this can alter all the above scenarios. We are returning to the phase in which markets were reacting to the vaccine news giving a glimpse of hope that the pandemic will be conquered.


Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.

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