The spread of the Delta coronavirus variant appears to have usurped inflation as the key concern. The Delta strain will lead to a bumpier and more uncertain path for the global recovery, but for now we think it only warrants only a small adjustment to our baseline GDP forecasts – the downside risks will be explored in a forthcoming scenario within our Global Scenarios Service.
After weeks of low cases, Israel – once the poster child of the Covid vaccine rollout – has seen a sharp rise in cases, adding to evidence that simply vaccinating a lot of people is no guarantee of a smooth return to normality.
Nonetheless, the probability of major lockdowns in Israel and most economies with high levels of immunity due to vaccination or prior infection seems fairly low. The main risk to growth is from lower-level restrictions and/or disruption from higher Covid cases and ongoing uncertainties prompting more cautious behaviour. In these economies, we thus don’t see the need for large-scale revisions to our growth forecasts.
For those economies that have adopted a zero Covid policy, Delta may pose greater challenges. Australia has already been forced to put half its population into lockdown to contain the spread of Delta, and greater restrictions may be necessary in the future if the zero Covid policy is maintained. At the same time, slow vaccination rollout and low immunity due to prior infection risks a surge in cases and tough restrictions if these economies switch to containment.