Mark Zandi is growing more concerned about the health of the US economy heading into 2022 following the apparent demise of the Build Back Better Act and the rapid spread of Omicron.
“With Omicron looming and DC in disarray, risks to the economic recovery next year are not inconsequential and are rising,” Zandi, the chief economist at Moody’s Analytics, told CNN on Monday.
Moody’s Analytics will most likely downgrade its US economic forecast in the coming days, Zandi said in a phone interview, due to the one-two punch from the worsening pandemic and Senator Joe Manchin’s opposition to Build Back Better.
Moody’s is currently predicting GDP growth of 4.4% in 2022, but Zandi said that forecast will be cut by as much as one percentage point.
“Right now, it does feel like this Covid wave is bigger and more serious than I thought it would be just a few weeks ago,” Zandi said, pointing to the rapid spread in Europe, especially the United Kingdom.
Even though symptoms from Omicron may be less severe, resulting in lower hospitalizations and deaths, Zandi worries the caseloads will be so high that “hospital systems could be overwhelmed.”
“Once that happens, that disrupts business,” Zandi said. “Governments have to start shutting businesses down or reimposing social distancing rules and restrictions on travel. Things that make it more disruptive to the economy.”
The Omicron variant is now dominant in the United States, accounting for 73% of new coronavirus cases, according to estimates from the week ending December 18 posted Monday by the US Centers for Disease Control and Prevention. That’s up from just 12.6% in the prior week, ending December 11.
Meanwhile, Manchin, the West Virginia Democrat, set off a political shockwave on Sunday by announcing his opposition to Build Back Better — President Joe Biden’s signature legislation.
Zandi said that is a major factor behind his gloomier economic view as well.
“Even if we get some form of Build Back Better, it’s going to be diminished from what was on the table,” Zandi said. “It’s just not going to provide the same support in the near-term or long-term.”
Similarly, Goldman Sachs on Sunday cut its US GDP forecasts for the next three quarters, citing Manchin’s opposition to the legislation.
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