Global Economic Roundup - December '21

Executive Summary


The month of December saw the emergence of the Omicron variant in many parts of the world after it was initially reported to the WHO in November by South African officials. While it’s still unsure as to how severe this strain will be, most analysts worry of the uncertainty cast upon the global economy which only recently saw signs of recovery.


Has Omicron raised fears of a reversal in global recovery?


Global cases have now hit 271 million while deaths are at 5.31 million. Experts are yet to see how the new variant Omicron will contribute to the rising cases and how it compares to the Delta variant of Covid-19 which resulted in a significant rise in cases and deaths globally this year.


IMF may cut its global growth view due to Omicron: The IMF Managing Director recently stated that global economic projections done by the IMF will likely be downgraded due to Omicron. In October the IMF said it expects global economic growth to be 5.9% this year and 4.9% next year, however these figures are likely to be revised downwards.


ADB brings down its growth projection for Asia: The Asian Development Bank cut its growth forecasts for Asia for both this year and 2022 due to the recent emergence of the Omicron variant. While also referring to other uncertainties such as the a prolonged slowdown in China’s housing market, rising inflation and global supply chain disruptions, the ADB said emerging economies in Asia would grow 7 percent in 2021 and 5.3 percent in 2022, down 0.1 percent from its previous estimate.


Tourism industry shaken again due to Omicron: The tourism sector in many countries started seeing healthy signs of recovery as Covid-19 cases fell, inoculation increased and travel barriers were lifted. However due to the recent emergence of Omicron we see new barriers being imposed to contain the spread of the new variant. The US government for example has banned most foreign nationals who have recently been in any of eight southern African countries.


Has inflation rattled due to the new variant and China’s slowdown?


Despite Omicron and a rise in uncertainty caused by China’s economic slowdown global economic recovery is still on a steady footing with inflation rising along with it. Experts also argue that economies are now better equipped to deal with the virus compared to the first Covid-19 lockdowns.


US inflation hits 40 year high: Annual inflation figures recently published show that the general price level rose by a staggering 6.8% in November, prices are rising at their fastest pace since 1982! Some economists blame the President Biden’s previous spending, designed to offer support amid the Covid pandemic, for exacerbating price increases. This also raises the likelihood of a rate hike by the Fed in 2022. In addition, supply pressures yet remain, with freight costs reaching all-time highs adding fuel to growing inflationary pressures.


Eurozone headline inflation hits a 25 year high: The headline inflation rate in the Eurozone rose to 4.9% at the end of November, higher than Octobers 4.1% and a consensus by Reuters expecting inflation to only be 4.5%. Higher energy prices is said to contribute mainly to the rise in price levels.


Asian economies unlikely to take a big hit due to China’s slowdown: While China’s slowdown has resulted in fears of cascading effects on other economies some experts believe that it may not have as significant impact as thought before. Over the past few year’s links between Chinas GDP growth and other emerging markets have fallen. Looking specifically at the figures, since 2015 the corelation was at a high 0.9 but has now fallen to 0.2. Recent constraints on China’s economy have mainly been attributed to the real estate crisis and energy shortages.



How have commodities been performing?


Oil prices see great volatility in December:


Oil prices rose to a peak of just above US$76 per barrel on the 9th of December and then fell to roughly US$74 on the 10th of December to only start rising again up to around US$76 by the 13th of December only to fall again after. The recent fall has mainly been attributed to Omicron concerns as well as fears of a sooner than expected rate hike by the Fed due to record breaking inflation figures.


Gold prices remain low in December:


Gold prices have thus far been hovering around US$1785 an ounce for this month of December. Prices have been significantly lower than November where gold surpassed US$1875 an ounce at its peak during the month. A main factor affecting the price during the last few days has been the wait by investors for US inflation figures as well as higher US treasury yields and a stronger dollar


 

Top 5

Massive U.S. Debts Could ‘Trap’ Powell as Fed Fights Inflation

The U.S. went on a borrowing binge last year could create financial stability concerns for Fed Chair Jerome Powell and his colleagues as they debate removing pandemic support in the face of what a report Friday showed were the hottest price rises in almost 40 years.

Read more - yahoo.com


Emerging markets’ pandemic-fueled debt party is coming to an end

The amount that developing-economy issuers borrow in the world’s biggest debt markets is expected to slow as interest rates rise and extraordinary pandemic spending is scaled back, dragging bond sellers back down to Earth after a COVID-fueled rocket ride.

Read more - japantimes.co.jp


Globalization and world trade bounce back from the impact of COVID-19: report

A new study done in line with the DHL Global Connectedness 2021 Index Update, shows that COVID-19 has not undermined globalization as much as some had predicted. Although travel and tourism have been hard hit, international trade has surged during the pandemic.

Read more - hellenicshippingnews.com

Pfizer and BioNTech provide update on Omicron variant

Pfizer Inc. and BioNTech SE announced results from an initial laboratory study demonstrating that serum antibodies induced by the Pfizer-BioNTech COVID-19 Vaccine neutralize the SARS-CoV-2 Omicron variant after three doses.

Read More - pfizer.com


Impact of Omicron on emerging economies to depend on restrictions, policy support: Moody's

The economic impact of the Omicron variant of COVID-19 on emerging economies will depend on a mix of government restrictions, public comfort with social interactions, and the capacity of governments and central banks to provide additional policy support to the private sector, Moody's Investors Service said on Wednesday.

Read more - cnbctv18.com



Compiled by: Emaad Rizwan

Disclaimer: This information has been compiled from sources believed to be reliable but Frontier Research Private Limited does not warrant its completeness or accuracy. Opinions and estimates constitute our judgment as of the date of the material and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The recipient of this report must make their own independent decision regarding any securities or financial instruments mentioned herein. Securities or financial instruments mentioned herein may not be suitable to all investors.