Commentary Directory

The Latest on Vaccinations and What it Means for Growth

Jacob Hess
March 01, 2021

The global economy remains on its back foot at the beginning of 2021 as vaccination deployment speeds towards its peak. Optimism among business leaders and in the stock market is firmly rooted in the success of vaccination distribution in order to begin the return to normalcy by the middle of the year. So far, four vaccines have been approved after reporting successful results with the latest Johnson & Johnson vaccine seeing approval on February 27th, 2021. As doses are rolled out and administered across the globe, everyone waits to see how the distribution of the limited supply develops.

Bloomberg's COVID-19 Tracker provides the most up-to-date data on vaccinations. As of March 1st, over 245 million doses of vaccines have been administered in 107 countries with over 76.9 million of those doses administered in the United States. In the US, daily vaccination rates average 1.8 million per day with some days seeing over 2.0 million per day. That translates to 1 or more dose for about 15.3% of the population. Dr. Anthony Fauci, the leading health figure in the US, says that the vaccination rate will have to reach 75 to 80% before normalcy can begin to return. Based on current rates, that would take about 7 months.

The rest of the world continues at a slower pace with about 6.8 million doses administered per day. Most of those vaccinations are being administered in China, the European Union, the United Kingdom, and India. Those four countries account for 65% of rest of the world vaccinations. The timeline at this rate would put a vaccination rate of 75% of the world population 4.5 years away. Of course, different countries will reach that level at different times. Israel, for example, has already fully vaccinated 37.6% of its population while much poorer African and Middle Eastern nations are still trying to secure a vaccine supply. However, in a heavily interconnected world, global herd immunity needs full vaccination coverage regardless of borders.

No one is more invested in global herd immunity than the largest economies which have suffered greatly from lockdowns, and therefore, the IMF G-20 nations monitor progress. The latest report suggests vaccines to be widely available in "G-20 advanced economies and several emerging market economies during 2021" but other areas might have to wait for 2022. Because of that, the IMF sees containment policies remaining in many economies outside of regions that have significant vaccine supply like the United States and the EU.

Advanced economies, like those of the G-20, and emerging economies (not including China and India) are expected to see a divergence in GDP growth. In the IMF's Jan 2021 World Economic Outlook see G-20 advanced economies growing at a low positive rate this year while non-G-20 emerging economies are projected to contract. These contraction forecasts are mostly expected in countries like Russia, Brazil, Mexico, and Argentina. The Latin America and Caribbean (LAC) and Middle East and Central Asia (MECA) regions are expected to see stronger contractions. China and India, large exceptions to the emerging economy rule, are among the highest projected GDP growers in 2021. Unsurprisingly, they are also in the top 5 in global vaccination rates.

The World Bank's reports have also pointed to this trend of doses per 100 people rising much faster than emerging economies. In fact, it cites the fact that "2/3rds of emerging markets and developing economies (EMDEs) and most low-income countries (LIC)" have not deployed any vaccine doses. As a result, EMDE investment is expected to lag the post-financial crisis rebound of 10.8% in 2010 at a projected 5.7% in 2021. History suggests that weak investment may "linger" as the World Bank has found that "losses to investment have been deeper and longer-lasting than GDP losses" after pandemics. Overall, it's a slightly less optimistic picture than what was imagined when vaccines were approved in late 2020.

Vaccines are the key to sentiment in 2021 that's why the data covering dose distribution will be heavily reported on. It may also drive financial markets this year. The outlook is still positive in most advanced economies, but the reality that vaccine availability in less developed regions of the world is weaker will soon set in. True normalcy can only be achieved in a massively interconnected world when those areas have been covered as widely as their richer neighbors.