Don’t forget Delta

Our last FIRMS report was entitled FX round-up — Calm before the next storm (18th November 2021) and less than a week later a storm hit with South Africa reporting the Omicron strain of Covid-19 to the World Health Organisation on 24th November. This is what we know so far about the Omicron strain, albeit with differing levels of certainty.

57 countries, including 21 EEA countries, have confirmed cases of Omicron. The number of recorded Omicron cases is still very small but the actual number is likely to be larger. Omicron is more transmittable than previous strains, including Delta, and the number of Omicron cases has risen rapidly albeit from a very low base. In South Africa Omicron is now the likely dominant strain of the Covid-19 virus. Existing vaccines are less effective against Omicron than against other strains but booster jabs may help palliate this loss of effectiveness. The WHO has so far reported zero deaths attributable to the Omicron strain and most of those who have so far tested positive for Omicron have either been asymptomatic or displayed moderate symptoms in a marked departure from previous Covid-19 waves. Only South Africa and some African countries have so far reported people being admitted to hospital with the Omicron strain. However the age profile of Omicron patients could be materially different from that of patients in previous Covid-19 waves.

One theory is that over time Omicron could replace Delta as the dominant strain in terms of new Covid-19 cases. However, most governments have in the past fortnight introduced or multiplied restrictions on international travel and many governments, particularly in the EEA and Asia, have taken precautionary steps to slow the spread of the Omicron strain and protect populations. We think governments in coming weeks are more likely to multiply than roll-back blanket social distancing measures.

Importantly, a number of Eurozone governments — including the Netherlands, Austria and Germany — faced with rising death rates attributed to the Delta strain, had already started tightening social distancing measures and speeding up vaccination programs weeks before the Omicron strain was first reported.

These social distancing measures in aggregate are likely to depress Eurozone economic activity, at least in the short-run, in our view.

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