A new kind of Covid-19, a lurking risk to public finances

After the discovery of a new type of Covid-19 in recent days, Ómicron, with a negative impact on global markets, analysts considered it to be a potential risk to both the Mexican economy and public finances given the measures that some countries have begun to take to prevent its spread.

In this sense, Janneth Quiroz, Director of Economic Analysis at Monex, noted that the pandemic continues to pose a risk not only to the economy, but to public finances, and this new alternative has come to remind us of that. Therefore, he noted that while there is no more information available, this presents an inherent risk to public finances.

“It is still too early to determine the impact of the new form; however, we already have some experience. When the delta variant was detected, in India, infections began to increase dramatically around the world and caused a partial shutdown of economic activity, but not as severe as that We saw it in 2020. Similar, although it has not yet been analyzed,” he said.

The World Health Organization (WHO) announced last Friday that the new variant, called Ómicron, was of concern due to the large number of mutations it presents, some of which indicate an increased risk of contracting the Covid-19 virus.

This variable, according to the first reports, has led to an increase in cases in almost all South African provinces, in addition to the fact that it is spreading faster than the previous Covid outbreak.

The news will hit global markets quickly, while many European countries have travel restrictions to South Africa, while countries such as Belgium, Hong Kong and the United Kingdom have already detected their first cases with this variant.

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“The foregoing increases the risks of implementing measures similar to those taken in the second quarter of 2020, with negative consequences for global economic activity. In the coming days, Gabriella Seiler, Director of Economic and Financial Analysis at Banco Base, said, Markets will be watching the news about this new alternative.”

It is difficult to reach an estimate of growth

For his part, James Salazar, Deputy Director of Economic Analysis at CIBanco, indicated that the emergence of this new alternative could hinder the recovery of the Mexican economy, which had previously been negatively affected by the third wave of infections in the country, which caused it. by a delta variable.

“Although we exclude a scenario like last year of total closure, there will be restrictive measures on mobility and economic activity. This, on the one hand, will push the tax part, and the economy on the other. For example, for 2022, the government has growth forecasts It’s 4.1%, which in itself seems really optimistic, and with this alternative from Omicron, it’s going to be tough.”

He added that the foregoing will hinder the collection targets set by the government for the next year of just over 7.08 trillion pesos, of which 3.9 trillion pesos will come from tax revenue, which can be complicated by the lower spending that the consumer can exercise.

“We have a slower rate of economic growth, with less job creation and high inflation. In January, you may have a difficult scenario at the beginning of the year for the average consumer.”

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