Omicron fears downgrade US, China growth forecast

omicron - Omicron fears downgrade US, China growth forecast

WASHINGTON: Goldman Sachs has downgraded its US economic growth forecast for 2022 from a previously expected 4.2 percent to 3.8 percent due to rising risks around the new Covid-19 variant, Omicron.

According to Goldman economist Joseph Briggs, who was cited by Reuters, the new coronavirus strain could slow the US’ economic reopening, but is expected to have “only a modest drag” on services spending.

“While many questions remain unanswered, we now think a moderate downside scenario where the virus spreads more quickly but immunity against severe disease is only slightly weakened is most likely,” Briggs said in a note on Saturday. He added that labour shortages could last longer if people do not feel comfortable returning to work due to Omicron.

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The spread of the virus could worsen supply shortages if other countries implement tighter restrictions, according to Goldman. However, the increase in vaccination rates among foreign trade partners could prevent severe disruptions, the report said.

Meanwhile, China’s economy is expected to grow around 5.3 percent in 2022, bringing the average annual growth rate forecast for 2020-22 to 5.2 percent, the Chinese Academy of Social Sciences (CASS), a top government think tank, said on Monday.

The advisers to the government will recommend that the authorities set a 2022 economic growth target lower than the target set for 2021 of “above 6 percent,” amid growing headwinds from a property downturn, weakening exports and strict Covid-19 curbs that have impeded consumption.

The world’s second-largest economy is expected to have expanded by about 8 percent this year, according to the annual blue book on the economy from CASS. The think tank warned that the property downturn was likely to persist and weigh on the expenditures of local governments next year.

It urged the central government to proactively engineer a soft landing for the property sector, to avoid failed land auctions in big cities and to fend off risks of quickly falling property prices in smaller cities, the report said.

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