How Omicron Might Knock Financial Restoration Off Monitor

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LONDON – This week, Marisha Wallace finally had to admit that her planned five-day skiing holiday in Switzerland in mid-December could not be saved: the sudden decision by the Swiss government to impose a 10-day quarantine on some international travelers meant she would not leave their hotel or return to London on their scheduled flight.

“This is the way the world is going right now,” said Ms. Wallace, an actress and singer. “You can no longer plan.”

This makeshift state, which has been reinforced around the world, has left the still fragile economy in limbo as more coronavirus infections and the new variant Omicron have emerged around the globe.

“You have no way of knowing how bad it will get,” said Ángel Talavera, director of European economics at Oxford Economics.

The forecasting firm has outlined three scenarios, including one that predicts no discernible impact on economic growth and one severe enough to cut the next year in half. It will take several weeks for more clarity to emerge, concluded Oxford.

The current round of restrictions has already restricted travel and dampened consumer confidence. A virulent, vaccine-resistant strain could bring the economy back into a tailspin, while a milder strain could ease the burden on health systems and get the recovery going again.

As a report by the Organization for Economic Co-operation and Development published on Wednesday showed, the global economy has recovered faster and stronger this year, despite uneven growth than was expected. However, the report, which was largely prepared before the latest coronavirus news, warned that growth would slow: in the euro zone to 4.3 percent next year from 5.2 percent in 2021; and in the US from 5.6 percent to 3.7 percent in 2022.

The organization characterized its outlook as “cautiously optimistic”. However, he reiterated how inextricably linked economic wealth is to the coronavirus: “The economic priority is to get people vaccinated,” the report concluded.

In fact, the Omicron threat to recovery is only the latest in a series of zigzags the global economy has seen since the coronavirus began its triumphant advance across the continents last year. Hopes that an abating pandemic would allow everyday life and trade to normalize have repeatedly been dashed by the virus.

Even before this latest variant was discovered, a fourth wave of infections turned Europe into a Covid hotspot and led to new restrictions such as lockdowns in the Netherlands and Austria.

During previous outbreaks, trillions of government aid helped quickly revive the troubled US and European economies. It also brought some unexpected side effects. Combined with a backlog, this support contributed to a shortage of manpower and materials and rising inflation.

Given the large amount of debt that has been amassed over the past 18 months, such aid is unlikely to return even in a sharp downturn – and neither are any wholesale closures. Vaccines offer some protection, and many people say they’re not ready to go back into hibernation.

People and businesses alike have shifted into a wait and see mode. “A lot of things seem to be on hold, like the job market or general consumer choices,” said Nick Bunker, director of economic research at job site Indeed.

How this will affect unemployment and inflation rates is unclear. Federal Reserve chairman Jerome H. Powell said Tuesday that concerns about persistent inflation are mounting. The OECD also warned that inflation could be higher and last longer than originally expected.

Omicron’s appearance only adds to the uncertainty, said Laurence Boone, the organization’s chief economist, in an interview.

“If we can deal with this, like the virus we’ve had so far, it can have supply chain disruptions and inflation could take longer,” she said. However, if the new variant leads to greater standstills and falling confidence, this could reduce the spending frenzy and dampen rising prices.

Updated

Dec. 2/02/2021, 9:40 p.m. ET

In the past few days, governments have reacted with a confusing hodgepodge of stern warnings, travel bans, mask requirements and testing rules that further cloud the economic outlook. This patchwork response, combined with different levels of risk tolerance, means that recent outbreaks of the virus will have very different effects, at least in the short term, depending on where you are and what you are doing.

In France, Luna Park, an annual month-long amusement fair in the southern city of Nice due to open this weekend, has been canceled after the government suddenly seized the huge warehouse where roller coasters, shooting galleries and carousels were set up, to convert the room into an emergency vaccination station.

“Today I’m trying to save my company and I’m not sure I can,” said Serge Paillon, owner of the park. He feared huge losses, including € 500,000 (about $ 566,000) that he had already invested in the event, as well as refunds on tickets that had been on sale for several months

Mr Paillon took 20 employees on leave. Another 200 festival staff, who came from across the country to organize the 60 games and rides, were ordered to stay at home.

“It’s been a disaster for a year and a half,” said Mr Paillon. “And now it starts again.”

Israel’s decision on Saturday to close its borders to all foreign tourists for two weeks is likely to reduce the number of tourists visiting Israel and the Occupied Territories this December by up to 40,000, or nearly 60 percent of expected estimates, the government said .

Wiatt F. Bowers, a city planner, had planned to leave Jacksonville, Florida for Tel Aviv on Wednesday but had to cancel – the fifth time in 18 months that he had had to cancel a planned trip to Israel. He will rebook, but doesn’t know when.

The Coronavirus Pandemic: Important Things You Should Know

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Biden’s Winter Covid Plan. As Omicron hits the US, President Biden announced a new pandemic strategy that includes hundreds of family-oriented vaccination centers, booster vaccinations for all adults, new testing requirements for international travelers, and insurance reimbursement for home testing.

Changed views on boosters among experts. For months, many public health experts have been resisting plans to introduce Covid booster vaccinations in all adults. But as Omicron is gaining ground, the researchers change their minds, now believing that the shots might offer the best defense against the new variant.

Foreign tourism, which brought a record 4.55 million tourists to Israel in 2019, was almost gone. Between March 2020 and September 2021, foreigners were denied entry to Israel – and thus also to the occupied territories, where entry and exit is controlled by Israel.

In Bethlehem, where tourism is the most important branch of the economy, income has fallen by more than 50 percent as a result, said Mayor Anton Salman in a telephone interview.

Elias al-Arja, the head of the Arab Hotel Association, which represents about 100 Palestinian hotels in the Occupied Territories, said he was less concerned about the short-term effects of the sudden travel ban than about the long-term message of unpredictability sent to potential visitors.

“The disaster is not the groups that canceled in the next two weeks,” said Mr. al-Arja. “How can I convince people to come to the Holy Land after we promise you can come, but then the government will close the border?”

Reluctance to travel could also mean an upswing in other industries if the new variant is not as harmful as feared. Jessica Moulton, senior partner at McKinsey & Company in London, said previous spending patterns during the pandemic had shown that some of the money people would otherwise spend on travel is being spent on food instead.

She estimated that the roughly $ 40 billion British consumers saved while traveling last summer was used for shopping and dining out.

At the moment, Ms. Moulton said, “To the extent that Omicron reduces travel, which will happen around Christmas, it will benefit restaurants.”

In Switzerland, where travelers from the UK and 22 other countries now have to be quarantined, the policy change immediately affected hotels.

“The majority of travelers from England – between 80 and 90 percent – have already canceled,” said Andreas Züllig, head of the Swiss hotel association HotellerieSuisse.

Ms. Wallace, who canceled her trip to the Cambrian Hotel in Adelboden, was one of several people who changed their hotel reservations after the Swiss government announced on Friday just a week before the slopes opened.

“This of course has an impact on our very important winter and Christmas business,” said Anke Lock, the manager of the Cambrian, who estimated that 20 percent of the hotel’s December bookings were at risk.

At the moment, however, most of the guests are watching and waiting, said Ms. Lock: “We have switched the bookings from guaranteed to provisional.”

The only certainty is the extreme uncertainty about the economy.

Patrick Kingsley contributed the reporting from Jerusalem, Melissa Eddy from Berlin and Léontine Gallois from Paris.