At a time when the global economy was showing signs of recovery with economic supply chains beginning to unlock, the emergence of a new variant of the coronavirus, Omicron, has raised new fears more on the economic front than being yet another lethal dose on the health front. Its outbreak has put all major countries on the back-foot with a host of new travel restrictions, which is going to be a major impediment to the recovery of the economic supply chain in the coming times. However, the severity of the economic impact will depend on how dangerous the new variant proves to be, and how effectively the existing medical treatment protocol guards the human lives against it.
Now the fears loom large that the global growth story won’t be in line with the projections made earlier when mass vaccination of populations against the Covid-19 infection was underway. Even as intensity of the lethal behavior of Omicron is yet to be assessed, various agencies and economists have already anticipated a halt in economic recovery and are revisiting their growth projections, forecasting downward trend for 2022.
Even as the International Monetary Fund (IMF) has expectations of a growth of 4.9 per cent for the next year, it didn’t rule out the main threat from variants of the virus. As Omicron has hit the scene as one more variant, its impact could be dangerous as economic lockdowns across various global locations have again witnessed a comeback. Notably, Oxford Economist have dished out their prediction much before the Omicron variant emerged on the scene predicted that 2022 growth could fall to around 2.3 per cent, as compared to the 4.5 per cent. Taking this prediction into account, the stage seems set for the economy to slide down owing to the weight of this new variant of the virus.
For all practical purposes the outbreak of Omicron is going to be yet another tough challenge for the governments. The medical treatment protocol is already in place where vaccination has been the main arsenal in hand to neutralize the lethality of the virus. But the economic woes brought in by the virus are something more dangerous as it is hugely loaded with elements of pushing mass populations across the globe into starvation. Nothing will be more painful than witnessing people losing their lives for want of food in a world which is projected as a modern world just short of giving life to the dead!
It would be interesting to watch the capabilities of the governments to roll out economic stimulus packages to support their citizens in case Omicron-induced lockdowns hit the scene. However, in view of the devastation wrecked by the infection in the second wave would force the people to take extra precautions beyond government measures to stay safe against the new strain. For instance, they would voluntarily limit their own movement and economic activities. This will reduce their consumption level. Once consumption witnesses drop, the demand will automatically fall. Precisely, the markets will face a crisis in demand-supply levels and ultimately it would impact the growth story. Here it is needless to mention that inflationary pressures would also worsen as supply chains get squeezed. To be precise, the Omicron variant has created a climate of uncertainty and fear, directly slowing down the economic recovery.
Though Covid-19 has been an unprecedented health emergency, its impact has been equally deadly on the economy. In the last two years of its global rampage millions have been rendered jobless and millions of households have witnessed a hit on their incomes. However, the experiences gained out of the crisis are learning in nature and can prove productive as far as being ready for similar catastrophes in future is concerned. The virus has permanently embedded itself into our environment and we have to align ourselves to live with the virus without allowing it to harm us. The responsibility of denying access to the virus rests on everybody’s shoulders.
In a way, the outbreak of the virus has been a wake-up call for all of us with regards to health as well as wealth. It has triggered a change in the way of looking at our personal finances. Now, the outbreak of the Omicron variant of the virus is yet again an opportunity to fine-tune our financial capabilities in line with the given economic scenario.
Let me quote an online survey conducted by Scripbox where it has been revealed that more than 80% of the respondents surveyed say that Covid-19 has been a wake-up call for them, to get their personal finances in order and to course correct for better financial health. One in three respondents says that the biggest stressor during Covid-19 has been financial health and well-being, ahead of physical health and relationships.
In this scenario, among other things, creating an emergency fund is inevitable. Here it’s imperative to reduce the discretionary spending and pay more attention to be better prepared in the new Covid-induced normal. An emergency fund is defined as a contingency fund that not only helps financially during most difficult times but also prevents the derailment of your savings for long term goals.
Basically, an emergency fund should be a norm in one’s life. It is extremely important at any stage of life and the best would be to prioritize it as one of the top financial goals at a young age. One can create this fund by keeping aside a sufficient amount, depending on one’s financial capacity. This fund can be utilized during any financial crunch, without affecting one’s investment goals. If the survey findings are to be believed, these funds have emerged as essential tools for all age groups in the post-Covid crisis.
Let me quote a financial expert in Mint. When it comes to how much is enough for creating an emergency fund, the expert says: “Usually, an emergency corpus of between 6 to 12 months of living expenses should be accumulated. At a glance, it might look like a large corpus to accumulate, as it is not possible to suddenly put together 6-12 months’ monthly living expenses, separately. So start small. For instance, start with accumulating 2-3 months living expenses, and then gradually keep increasing it.” Notably, while creating an emergency fund, one should consider his monthly expenses such as loan EMIs or any other fixed expenses that one may have. “Arrive getting this number, multiply the same by the number of months to arrive at the corpus required, suggest the expert.
One can let his emergency fund talk by investing it in other financial instruments. However, the investment pattern should have a portion of funds available immediately at the time of need. In short, the emphasis has to be on saving the right amount and any time is a good time to save. While saving, one has to draw a balance between present and future needs. Setting more aside and spending less on the non-essentials is the most crucial base of saving money. The point of good preparedness is to start doing it before you are forced to.
When it comes to savings, the early birds have an advantage. They manage to save a decent pile for all their requirements with much less fuss. They can make their money grow so well that they secure their future without depriving themselves today.
You may have saved a lot and yet be forced to be miserly when you need money. This slip between cup and the lip can happen if you don’t invest your savings in an appropriate manner. So, save in such a way and invest your savings in instruments, which not only ensure appropriate growth of your money but also make your money available anytime and anywhere. Last, but not the least; diversify your income in the given pandemic situation if it is preventing you from working. Build your skills, consolidate your knowledge and think about how you can leverage those skills to start a side hustle. Precisely, monetize your expertise and diversify your income sources to stay financially afloat in the crisis. Notably, the definition of normal is all set to change after the emergence of the Omicron variant on the scene. So, utilize the crisis time to ensure that you remain financially fit for what the new norm in the post-pandemic will be.
(The views are of the author & not the institution he works for)
Disclaimer: The views and opinions expressed in this article are the personal opinions of the author. The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.