‘It Will Get Worse Before It Gets Better’

International | Feb 11 2021

‘It Will Get Worse Before It Gets Better’ – The Global Economy in the covid-19 Vaccine Era

-None of current vaccines offers a quick fix to global covid-19 pandemic
-Rollout of vaccines is creating a two-tiered world
-Global economic recovery likely a multi-year affair

By Ed Kennedy

2021 may be the ‘year of the rollout’ for a covid-19 vaccine – but it’ll take many years to finish according to The Economist’s Intelligence Unit.

The quest to end the danger and disruption covid-19 represents will be a mission that demands at least half a decade to get done.

The inability for poorer countries and developing nations to get timely access to vaccines will delay a global recovery.

Despite the triumph of multiple covid-19 vaccinations winning recent approval for rollout, there’s effectively zero prospect the pandemic period will end as rapidly as it began, and the global economy will continue to get worse before a sustained recovery occurs.

That’s according to Agathe Demarais, Global Forecast Director, and Ana Nichols, Industry Operations Director, of The Economist’s Intelligence Unit. The pair recently hosted a webinar entitled ‘The great divide: global access to a covid-19 vaccine’, which outlined their perspective on how the global economy shall perform this year, and what challenges can be seen waiting beyond 2021.

A Two-Tiered Planet

There’s much sad irony in the fact the UK began 2021 wrestling with some of the most challenging national numbers of covid-19 cases given it was a leader in developing a vaccine for it. But even though the AstraZeneca vaccine was co-developed at the University of Oxford – and since its rollout more than 10 million Britons have received the first dose of the vaccination – the UK remains in a race against time to vaccinate as much of the population as possible.

Not only to protect the health of its population, but minimise the extension of harm the pandemic is causing, in a nation that’s wrestling with the aftermath of Brexit alongside the covid crisis.

As Demarais and Nichols noted, across the channel politicians in Brussels are facing pressure from southern European nations like Italy and Greece to devise a rapid solution to the EU’s current covid woes. The failure to do so before summer risks seeing such nations so heavily reliant on tourism plunged into a whole new round of economic despair. Yet ultimately, as we begin to see the vaccine rollout globally those in EU nations that are expected to get (comparatively) earlier access to it may soon come to feel rather fortunate overall.

It’s no understatement to say there’s every reason to envision the vaccine rollout will split the world into a ‘two-tiered’ system. One where citizens of wealthy, developed nations get access to the vaccine comparatively quickly – either this year or the next – whereas people in other nations will be in for a long wait. Part of this owes to the expense of current vaccines.

As Demarais and Nichols detailed, the Pfizer vaccine costs around US$20 per dose – and given it has to be taken twice – that US$40 per person cost for nations already battling substantial economic woes that covid has exacerbated will be very confronting for any national budget.

It’s why according to Demarais and Nichols it remains highly questionable whether the vaccine rollout will even occur in poor nations. This reasoning is based upon the expectation a vaccine won’t be widely available to acquire in such countries for years – with a projected date of 2023-2024 – and many governments may ultimately decide not to engage in a nationwide vaccination program.

Instead, opting for an eradication strategy that will be risky. But for nations with a higher demographic of younger citizens, this offers a better ratio of expected cases and deaths compared to any nation with an aging population pursuing the same eradication strategy.

Yet regardless of this, in a globalised economy no nation however rich or poor can fly solo for long. At least not without dragging others down with them. At this time – save for some revelatory vaccine being found – it’s expected there’ll be no mass global vaccination, at least in the next few years. This is and of itself will be an issue, as only once all nations have entered a ‘post-covid-19’ era can the global economy really begin its march to recovery.

China & Russia's Leverage

In the meantime, one of the central strategic concerns identified in the webinar is the expectation numerous governments – most notably the Chinese and Russian – will seek to nakedly utilise their possession of the vaccine as a point of leverage with nations in need.

Given the growing influence the Chinese government in particular has been amassing (allowing for the disruption caused by the pandemic) in Africa and wider Asia, ideally strategic rivals like the US will seek to provide a ‘counterweight’ against Beijing’s dangling of the vaccine like a carrot. But this will no doubt rely upon Washington DC and the new Biden administration being able to bring the pandemic under control within the United States’ own borders first.

Many Variables, Mostly Negative

There must of course be the recognition that many variables remain in play here. Most of them are negative.

There’s ongoing concerns about the consequences of the vaccine among the general public in many nations so – although by no means is this going to convert the majority of the human race into anti-vaxxers – governments can expect there shall be a considerable number of the public resistant to a vaccine.

Especially after the ‘bad press’ following around 30 people dying in Norway after the administering of the Pfizer vaccine. All were over 80 years old, and the deaths have since prompted calls to cease administering Pfizer’s vaccine to the elderly. Whatever anyone’s views on any reluctance to having the vaccine, all can recognise such resistance among a substantial portion of the population will delay economic recovery.

Then there’s anxiety around the mutations of the virus. Prominent examples like the UK and South Africa strain could yet be followed by variations that are even more dangerous. Furthermore, there’s the recognition beyond health considerations exclusively that many workers and businesses who only just kept their head above water in 2020 could see their livelihood lost if a (or an additional in some cases) lockdown was imposed in their community.

But optimists shall be hoping that just as it was unclear last year whether a vaccine would even be found before multiple were brought into being, so too may 2021 deliver another game-changer that clears the way for a more rapid recovery of the global economy.

If such an event occurs – or a mass vaccine rollout somehow finds its way into being – then projections like the World Bank’s that the global economy will grow 4% in 2021 become more plausible. Meantime, for those businesses hoping a new year and vaccinations would bring a rapid return to normal, the early days of 2021 have shown economic recovery will not be a sprint, but instead a marathon.

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