The start of this year is an eerie echo of 2021. A new variant of coronavirus has sent infections rocketing in all parts of the world, threatening economic prospects for the year ahead. But rather than a rerun of the severe downturns we saw in 2020, the outlook is one of high global inflation and rising interest rates, with severe risks for the more vulnerable emerging and developing economies.

Last year showed that advanced economies were more resilient than expected to Covid-19 waves even without effective vaccines. The Alpha wave was appalling for people’s health, but hardly dented the global recovery. With more monetary and fiscal stimulus than proved necessary, the result was excess demand and inflation.

Getting through Omicron should be easier. Global case numbers are at record levels, but numbers of deaths are still subdued. Vaccines have proved effective at preventing serious disease and the community also has greater immunity from prior infection, so advanced economies should be better able to adapt. Despite this good news, the forecasts from the IMF, OECD and World Bank — which suggest that advanced economies can return to the path of economic output forecast pre-pandemic without any long-term damage — are likely to be too optimistic.