Global Economy

Delta variant casts shadow over global recovery

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Covid cases and vaccinations

Total global cases: 194.1m

Total doses given: 3.9bn

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Could a rise in infections, and in particular the spread of the Delta variant, bring the global recovery from the pandemic to a juddering halt?

As our Big Read details, advanced economies have been suffering “whiplash” as new cases emerge, forcing several to reverse plans to reopen. “The narrative seems to have changed from ‘look at how inflation is rising!’ to ‘look at how growth is slowing!’” wrote one analyst.

Today, we highlight the growing list of concerns around the globe, in particular across Asia — from China and South Korea to Indonesia and Singapore

More evidence is emerging of the Delta variant’s effect on business. Toyota has halted operations in Thailand. While in Australia, the variant has severely knocked back business activity, according to today’s PMI survey.

Ho Chi Minh City in Vietnam has imposed a new 6pm to 6am curfew to try to contain a wave of cases caused by the variant. As our Lex column notes, the country, which has some of the lowest labour costs in the region, is also the production base for the sports shoes of Germany’s Adidas and its US rival Nike. Many of the companies’ local suppliers have been hit by Covid-19 shutdowns, which — alongside a shipping container shortage — could make those new Kanye West trainers even harder to get hold of than usual this Christmas.

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Fears are not confined to Asia. In Europe, business confidence in Germany (see below) has fallen for the first time in six months, while European Central Bank president Christine Lagarde warned last week that the Delta variant was “a growing source of uncertainty”.

In the US, chief medical adviser Anthony Fauci said the country “could be in trouble”, unless it does a much better job of reaching the unvaccinated. Los Angeles County reported an alarming rise in Delta-driven infections on Sunday, after restrictions on businesses and venues were relaxed in the state on June 15. More than 90 per cent of those now in hospital are unvaccinated. At national level, the US government is considering tightening guidance on mask use among the already vaccinated.

As ever, the most vulnerable to the spread of Delta are the developing economies of Asia and Africa, where governments have minimal access to vaccines and limited ability to impose new lockdowns or support economic growth.

Global economy

German business confidence fell for the first time in six months, according to the closely watched Ifo survey, as concerns grow over supply chain disruption and increasing coronavirus infections. The services sector expected sales figures to continue to rise, said Ifo president Clemens Fuest, but in manufacturing “the scarcity of intermediate products is becoming more critical, and more and more companies complain of a lack of skilled workers”.

Millions have lost their jobs during the pandemic, many are facing hunger and inflation has made life more difficult, but a new commodities boom is bringing hope to Brazil. As our Big Read explains, the country supplies some of the most important raw materials for the global economy, from soyabeans and sugar to vast iron ore deposits and deep sea oil.

Line chart of GDP per capita, in 2017 constant prices at purchasing power parity ($'000s) showing Brazil has stagnated while Russia, China and India have kept growing

Tunisia’s young democracy is in crisis after the country’s president sacked the prime minister and suspended parliament because of its handling of the pandemic and a worsening economic crisis. The country has also suffered terrorist attacks that have targeted tourism, while political divisions have made it difficult to get agreement on a $4bn loan from the IMF.

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The outlook is looking brighter for Europe’s banks after they were forced to set aside billions last year in anticipation of a wave of loan defaults. Here’s our guide on what to expect in second-quarter results season.

European and US banks results

UK ministers met today to decide which “critical workers” would be exempt from self-isolation if “pinged” by the NHS app telling them they have been in contact with an infected person. At the moment, the list includes some in the food sector, alongside energy, telecoms and transport. Business groups have been lobbying hard for changes as staff shortages bite.

Ryanair raised its passenger forecasts after following rival easyJet by reporting a surge in bookings thanks to vaccinations, the EU digital travel pass and the relaxation of some travel restrictions. The UK’s Heathrow airport meanwhile reported a halving of revenues in the first half of 2021 and said cumulative pandemic losses had now reached £2.9bn.


The returns investors expect to earn after inflation on 10-year US Treasuries, the world’s most important government bonds, have reached a record low in a fall that has major implications for global markets, writes capital markets correspondent Tommy Stubbington.

Line chart of Real 10-year yield* (%) showing Inflation-adjusted yields on medium-term US debt sink

On Wednesday, the US Federal Reserve will hold its first meeting since hinting that monetary policy might be tightened earlier than expected. Here’s our guide to the Fed hawks and doves, who will be debating when might be the right moment to start “tapering” the Fed’s monthly $120bn bond-buying programme.

Some analysts meanwhile have blamed the Fed for record levels of wealth inequality in the US, despite its attempts to help Americans on low incomes, as its stimulus programme increases the prices of assets held by the rich. “There has been a surge in inequality that has manifested after Covid,” said a UBS analyst. “We are driving up wealth for the top earners . . . The Fed is trying to address inequality, but by some measures it seems like it is exacerbating it.”

Wealth inequality widens to a record level in the US

Have your say

Toranomon comments on Mourning the expat city state:

Having lived as an expat in east Asia for almost 40 years I would agree that there is a peculiar, albeit superficial, freedom in the anonymity that these cities are able to provide. Being ignored by more than 90 per cent of the local population is strangely liberating. But some of us do settle down with local partners and we buy residential property and take up residency rights. For me, one of the joys of living in Singapore was the ability to spend three out of every four weekends in neighbouring countries like Malaysia or Thailand; in Hong Kong hopping on a plane to Taiwan or Japan or Korea was second nature. The abrupt termination of air travel in March 2020 has ended this cozy arrangement and being marooned in a geographically claustrophobic city is no longer fun.

Final thought

Olympic medal hauls for smaller and poorer countries may seem low compared to the achievements of their richer peers, but what if the results were economically adjusted? Browse our alternative ranking to see which countries are punching above their weight.

British swimmer Adam Peaty poses with his gold medal for the men’s 100m breaststroke
British swimmer Adam Peaty poses with his gold medal for the men’s 100m breaststroke © AFP/Getty


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