- The delta variant will continue to create headwinds for the global economy amid slow vaccination roll-out
- Global macro momentum is set to ease further amid fading boost from stimulus and stalling re-opening of economies amid continuing virus challenges.
- The balance of risk to our growth outlook is to the downside, while supply side problems could lead to more persistent inflation problems stoking stagflation concerns.
COVID-19 remains a big problem for the world economy
The more contagious delta variant continues to spread fast in most of Asia and in various US states. In contrast, the situation in Europe has improved following the Delta variant wave and steady roll-out of vaccine, with Euro Area seeing lower new infections while UK cases are rising again following widespread re-opening of its economy. Overall, for Europe and other regions that have vaccinated large parts of their populations, hospitalizations and deaths remain clearly below earlier levels, which is not the case in the US at the moment. Another exception is Israel, which has seen a surge in hospitalised COVID-19 patients, as vaccines appear to have lost their effectiveness earlier than thought.
Roll-out of vaccination has stalled in the US where a large part of the population remains sceptical about the vaccines. In most of Asian countries, roll-out of vaccines is also advancing slowly given the lack of available vaccines, logistical problems in rolling out vaccines and significant vaccine scepticism, while vaccines are being steadily rolled-out in most Latin American and European countries.
At the current pace, it will be difficult to reach the necessary vaccination level before the cold winter period in the US and Europe, where the contagious Delta variant will have better conditions to spread. Hence compared with our assumptions in our spring forecast that by the fall some degree of herd immunity would be achieved, countries like the US and in Asia, but even in Europe seems vulnerable to renewed virus problems which could trigger select lockdowns especially in the service sector. This also means that we
are most likely still discussing and talking about COVID-19 next year.