OCED data backs cautious optimism, suggesting that the effects of Omicron on global recovery is still uneven, but will be limited and short-lived.
Adam Tooze
Adam Tooze, historian, professor at Columbia University and the director of the European Institute, shared an article on Nicolas Woloszko, an economist at the Organisation for Economic Co-operation and Development (OECD) producing a weekly GDP index for 46 middle- and high-income economies, which showed that the GDP across these countries is about 2.5% below its pre-Covid trend. This is worse than the November GDP that was 1.6% below the pandemic trend, but better than a year ago when the output was nearly 5% below it.
Woloszko uses data from Google-search activity on everything from housing and jobs to economic uncertainty during the pandemic. On the other hand, Goldman Sachs’s share-price index of European firms, such as airlines and hotels, a proxy for anxiety about the virus, indicates a surge relative to wider stock markets in recent weeks.
Some factors that explain the Omicron fear, include the great uncertainty around the virus’s growing transmissibility outweighing its virulence, thus leading to a surge in hospitalisations and deaths. However, few countries apart from China, seem to believe that additional draconian restrictions on people’s movements are required.
The gap between the best and worst performers continues to be wide, as countries like South Africa and the UK are recovering quickly from the Omicron wave. Meanwhile, according to the OECD, the Spanish economy is still about 7% smaller than its pre-pandemic trend.
Arvind Virmani
Arvind Virmani, economist and former chief economic advisor to the Government of India, shared an article on Korea having surpassed Japan in per capita GDP and its lead growing. Virmani tweeted the trend to be very clear and not being about the pandemic reducing per capita GDP more in one country than in another country.
According to the World Bank, Korea already surpassed Japan in per capita GDP in 2019 in real terms, with even a better performance in the Covid era. The International Monetary Fund (IMF) has further predicted that Japan’s GDP will be only 0.2% above it 2019 level in 2023, as compared to Korea’s which will be up 6%.
Korea’s per capita GDP has been attributed to the country’s productivity, that is, GDP per work-hour, which experts claim has been growing faster than Japan’s during the latter’s lost decades. Korean workers also enjoy higher wages today than the Japanese. Despite a slow growth as economies mature, Korea’s average per capita growth in the five years prior to Covid-19 was 2.4%.
Mark Weisbrot
Mark Weisbrot, economist and co-director of the Center for Economic and Policy Research (CEPR) in Washington, D.C., shared an analysis by the economist Dean Baker on what has happened to US inflation since the Covid-19 pandemic, which he believes should be read by members of the Congress or anyone interested in the phenomenon, and how it should be approached.
Baker believes that far more important than the causes of inflation in 2021 such as the pandemic, is the question of its impact on expectations of future inflation. Therefore, if the US economy is to see a 1970s wage-price spiral, it implies that people were expecting high inflation to persist, rather than being just a one-time jump. However, this was not the case.
He believes that the breakeven inflation rates for inflation-indexed bonds and standard Treasury bonds have risen only modestly and the differences between the CPI and core PCE is also consistent with the Fed’s 2.0% average inflation target. Therefore, US inflation would quickly be falling back to the rates seen prior to Covid-19.