IMF chief warns Omicron could slow global growth

Red Cross says new variant ultimate evidence of danger from vaccine inequity

December 4, 2021 08:29 PM

The new Omicron variant of Covid-19 could slow the global economic recovery, just as the Delta strain did, IMF chief Kristalina Georgieva said. "A new variant that may spread very rapidly can dent confidence and in that sense, we are likely to see some downgrades of our October projections for global growth," she said at a Reuters event.

In its most recent World Economic Outlook, the fund projected global growth of 5.9 percent this year and 4.9 percent in 2022, but the United States and other major economies suffered sharp downward revisions after the spread of the Delta variant "caused some friction," Georgieva said.

"Even before the arrival of this new variant, we were concerned that the recovery, while it continues, is losing somewhat momentum," the IMF chief said, noting that policymakers are now dealing with new issues like inflation.

The IMF's most-recent forecasts raised concerns that global supply chain issues and uneven distribution of vaccines were slowing the rebound, and causing some countries to be left behind.

A surge in demand in many advanced economies coupled with shortages of key components like semiconductors has fueled a wave of prices increases.

Less than two months ago, Georgieva expressed confidence that inflation would not become a "runaway train" but on Friday she said the US Federal Reserve will have to increase interest rates in 2022, rather than in 2023, as the IMF previously predicted.

The Fed, which cut the benchmark lending rate to zero in the early days of the pandemic, already has started to pull back on its stimulus measures and has signaled it will speed up that process, which would put it in position to lift rates off zero by midyear.

"We do believe that the path to policy rate increases may be walked faster," Georgieva said.

Vaccine inequity
The emergence of the Omicron variant of the coronavirus is the "ultimate evidence" of the danger of unequal vaccination rates around the world, the head of the Red Cross said on Friday.

In an interview with AFP during a visit to Moscow, Francesco Rocca, the president of the International Federation of Red Cross and Red Crescent Societies, also raised concerns about the politicisation of migrants and for the plight of civilians in Afghanistan as winter approaches.

Asked about the global approach to vaccinations, the head of one of the world's largest humanitarian groups said more needed to be done to fight rampant vaccine inequality.

"The scientific community has warned... on several occasions about the risks of very new variants in places where there is a very low rate of vaccinations," he said.

About 65 percent of people in high-income countries have had at least one dose of vaccine against the coronavirus, but just over seven percent in low-income countries, UN numbers show.

Western countries have been accused of hoarding vaccines and the WHO has urged them to avoid a rush to give out booster shots when millions worldwide have yet to receive a single dose. 

"This is a selfish approach coming from the Western community, this is really a blind approach," said Rocca, an Italian lawyer and longtime Red Cross volunteer who was elected to head the IFRC in 2017. 

"It's unbelievable that we are still not realising how much we are interconnected. This is why I call the Omicron variant the ultimate evidence."

- Migrants as 'weapons' -
Omicron, a heavily mutated version of the coronavirus, was first reported in South Africa on November 24 and is now present in more than three dozen countries. 

It has sparked a wave of travel bans, cast the global economic recovery into doubt and led to warnings that it could cause more than half of Europe's Covid cases in the next few months.

"The only way is to vaccinate, so access for everyone, everwhere," Rocca said, saying it was a "moral imperative" to look at suspending intellectual property rights for Covid-19 vaccines in order to boost production.

After a trip last month to Belarus where thousands of migrants trying to enter the European Union have been blocked on the Polish border, Rocca said he was concerned about people fleeing their countries being used for political purposes.

Critics have accused Belarus's strongman leader Alexander Lukashenko of luring the migrants to his country to send across the border in revenge for sanctions.

"Of course this is not new, now maybe it is only more evident that they are used as a political tool, weapons," Rocca said.

Poland has refused to allow the migrants, mainly from the Middle East, to cross. Some have returned to their home countries but many remain along the border in difficult conditions.

- 'Humanitarian tragedy' for Afghans -
Western governments, Rocca said, should do more "not in terms of receiving or not receiving" migrants but to address the reasons they want to leave their countries. "You cannot stop the desperation... they will find a solution to save their own lives," he said. 

"Those who have more power have the responsibility to fix the crises... not only to allocate some resources from time to time without a political strategy."

And with winter approaching in Afghanistan, he said aid groups like the Red Cross are deeply worried about a "potential humanitarian tragedy".

"We are talking about children, we are talking about the elderly. So it's not politics, this is about the lives of millions," he said.

The United Nations has warned that around 22 million Afghans will face food shortages in the winter months as the country faces an economic crisis aggravated by the Taliban takeover in August.

Washington has frozen about $10 billion of assets held in its reserve for Kabul and international financial organisations have halted Afghanistan's access to funding.

Rocca said it was not the place of the Red Cross to discuss the merits of sanctions against the Taliban but insisted they should not "punish civilians".

"We have to deal with human beings, and the lack of political dialogue is making their lives even more unbearable," he said.

The IFRC, based in Geneva, supports local Red Cross and Red Crescent activities in 192 countries.

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