Omicron Could Reverse Latin America's Progress In Containing Pandemic

• For this week, Fitch Solutions will be watching the development of the Omicron variant of COVID-19 in both Latin America and the rest of the world for potential impacts on the agency’s growth outlook for the region. Latin America has come a long way towards getting the pandemic under control since mid-2021, as new cases have fallen sharply and the regional vaccination rate has pushed towards 80%. 
• However, the first cases of Omicron in the region were reported in late November in Brazil, and it has been identified in seven countries including Mexico, Argentina and Chile as of December 17. Given the variant’s apparent higher transmissibility, there is a significant risk that it causes renewed spikes in cases in the coming weeks. 
• The spread of the variant poses downside risks to Fitch’s forecast for Latin America to see 2.3% real GDP growth in 2022. New outbreaks could cause leaders across the region to re-impose restrictions on mobility. While restrictions on a city or state level would be a blow to private consumption, investment and economic confidence, Fitch does not believe there is sufficient political will to bring back national lockdowns of the intensity seen in Q220. 
• The risk of lockdowns or reduced demand, due to concerns about the virus in many of Latin America’s trading partners, could weigh on commodity prices, demand for exports or remittances, dragging down growth across the region.

(Source: Fitch Solutions)