American multinational investment bank and financial services company, Goldman Sachs Group economists has cut their forecasts for the United States economy this year and next, as a result of the Omicron strain of the coronavirus (COVID-19).

Goldman Sachs Group economists made the decision pointing out that the Omicron strain of the coronavirus would exert a “modest downside” drag on growth.

Goldman Sachs now expects US gross domestic product (GDP) to expand 3.8 per cent this year, down from 4.2 per cent.

The New York-based Goldman Sachs reduced its 2022 estimate to 2.9 per cent from 3.3 per cent.

In a report to clients, Goldman Sachs economist, Joseph Briggs remarked, “While many questions remain unanswered, we now think a modest downside scenario where the virus spreads more quickly but immunity against severe disease is only slightly weakened is most likely.”

He said Omicron was likely to have only a modest effect on services spending and could exacerbate supply shortages, arguing that It could also delay when some people feel comfortable about returning to work.

Briggs saw a mixed effect on inflation noting that while virus-sensitive sectors such as travel may be hit, further shortages of supplies and labor could push up prices in a more lasting way.

The International Monetary Fund (IMF) also warned that the variant may hinder the global economic rebound it was forecasting for next year.

 “Most of the overall risks are to the downside,” explained IMF Managing Director, Gita Gopinath, in a virtual speech to an International Finance Forum conference in Guangzhou on Saturday.