Omicron recedes, but other headwinds emerge

Successful vaccination campaigns allowed governments to keep economies open during the recent Omicron waves, and our Mobility Trackers suggest that activity held up much better than we had originally anticipated. Indeed, GDP figures for Vietnam published earlier today suggest the economy brushed off the impact of Omicron this quarter. However, while the risks to growth from COVID-19 are fading, new headwinds are emerging. The war in Ukraine and the surge in global oil prices will drag on the purchasing power of consumers, while a slowdown in the global recovery will weigh on the region’s exports. We recently cut our 2022 forecasts for regional GDP growth by 0.5%. Meanwhile, rising virus cases in China and the lockdowns that have been introduced in some major cities in the country raise the risk of further disruption to global supply chains. Vietnam’s close integration into Chinese supply chains makes it the most vulnerable country in Asia to problems in China.