The current COVID wave is likely to be short-lived but will impact mobility and service demand
Firms that depend on services and tourism should expect disruption to their in-person business for at least Q1. Individual states are implementing varying levels of restrictions to curb the spread of COVID-19, which will make demand planning for firms increasingly challenging. As a result, firms should regularly align with local teams to stay ahead of changing regulations and have strategic plans in place to flexibly respond to policy changes.
Details
Lockdowns in Brazil remain unlikely despite COVID-19 cases have exploded in Brazil over the last month since the arrival of the Omicron variant. Daily new cases surpassed the 200,000 mark for the first time last week and are likely to increase over the coming weeks as the country reaches peak infection rates. Hospital systems are beginning to feel the strain, with critical occupancy rates (over 80%) in seven states; most of the inpatients are those not fully vaccinated, as well as minors. Hoping to counteract the recent rise in cases, Brazilian states are looking to expand COVID ICU capacity. While a return to lockdown conditions remains unlikely, state leaders are bringing back some restrictions to contain the spread of the virus. São Paulo, Bahia, and Amapá have restricted attendance at large-scale public events, such as concerts and football matches. Additionally, proof of vaccination and the obligatory use of masks are becoming common policies across state lines.
Our View
We expect this current wave of COVID-19 caused by the Omicron variant, while intense, will be short-lived, as shown by data from the first-affected countries. In the case of Brazil, high vaccination rates nearing 70% full vaccination and the application of booster doses should prevent a notable increase in the number of deaths caused by Omicron. While lockdowns in Brazil remain unlikely, consumer spending will remain subdued in offline retail channels as consumer mobility falls and demand for local services drops. Service and on-premise consumption will likely be negatively impacted in Q1.
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