Fate of global economy rests on COVID-19 vaccination

Economy of a nation is run by its people. A nation and its economy freezes if the population is faced with a health hazard, thereby turning expenditure on public health into an investment for nations. Health enhancement of a population largely depends on prevention – as was recognized centuries ago by Desiderius Erasmus in his famous quote, ‘Prevention is better than cure.’ With the help of vaccination drives, nations across the globe are now trying to cure the economic fallout created

Pooja UPadhyay | Trainee Reporter T he World Bank, in a hopeful statement, had said that the collapse in global economic activity in 2020 was slightly less severe than previously projected. The reason cited was shallower contractions in advanced economies and a more robust recovery in China. However, in stark contrast to this, the economical disruptions and collapse of the entire structure was much more acute in the emerging markets and developing economies. World Bank estimates reflect that the coronavirus pandemic reduced global economic growth to an annualized rate of -4.5 per cent to -6.0 per cent in 2020, but the organisation also projected its growth by 8 per cent in 2021.

Late 2020 and early 2021 saw developed economies making major strides in vaccinating increasing shares of their population. This raised clear prospects of a recovery in those economies, which in turn, will improve the global economic condition. Withal, a surge in new COVID-19 cases in 2021 in large developing economies around the world and consistent resistance to vaccinations among some populations in developed economies is raising questions and worries on the speed and the strength of an economic recovery over the near term. Economic experts believe that the pandemic could risk continued labor dislocations as a result of lingering high levels of unemployment, which has not been experienced since the Great Depression of the 1930s.

Effect of vaccination on economies

A look at countries’ vaccination programmes reveals that countries that have been quick to vaccinate their population against COVID-19 and are

managing to control infections through effective public health strategies are seeing their economies recover more quickly. Reports claim that job vacancies in the United States are growing, including in sectors such as tourism. Meanwhile, on the other side of the world, poorer and emerging market countries are not only being left behind in the vaccination drives, but are still living in constant fear, uncertainty, and a cloud of economic downfall with no respite in sight. An organised, equitable and all-inclusive development and deployment of COVID-19 vaccines can enable a transition to a new postpandemic economy.

The United Kingdom

The country witnessed a rapid rollout of the COVID-19 vaccine, which lifted its GDP by 2.1 per cent in March and prevented a steep decline in its economy during the third lockdown in the first three months of the year. UK’s economy, owing to the rapid vaccine rollout, retreated by a better-than-expected 1.5 per cent during the first quarter of 2021, because it allowed easing of restrictions on economic activities and businesses were able to adapt to the new constraints at a quicker pace than expected. Even UK’s economists upgraded their growth forecasts for the rest of year after noting that the figures from the Office for National Statistics showed that the economy’s momentum exceeded their expectations. As of June 1, approximately 58 per cent of the UK’s population was vaccinated with at least one dose of the COVID-19 vaccine. Looking at these figures, the Bank of England expects the nation to recover to pre-pandemic levels by the end of this year.

China

According to the World Economic Situation and Prospects (WESP) midyear report released in May this year, the world’s two largest economies, China and the United States, are already on the road to economic recovery from the pandemic. China had established an ambitious plan to vaccinate 40 per cent of its population by the end of June, hoping for it to pave the way for lifting its economy’s growth rate to 9.3 per cent this year. As of June 1, China had already inoculated 47.19 per cent of its population, and it achieved the milestone of administering 20 million doses in a single day. In Beijing, the capital city, 87 percent of the population had received at least one dose of vaccine against COVID-19 as of June 4. The city administration has made getting a shot as easy as walking into one of the hundreds of vaccination points found all across the city. Moreover, vaccination buses are parked in high foot-traffic areas, including in the city centre and at malls. This fast paced vaccination drive enabled Beijing to lift restrictions from many economic activities and it witnessed its streets coming back to life. Similarly, with rapid vaccination, city of Wuhan is buzzing with life, and if it was not for the masks, it would seem like the pandemic never happened.

WESP report said that if China is able to maintain this speed of vaccination drive, it could translate into some form of herd immunity, which would in turn translate into a 0.4 percentage point gain to the GDP growth rate from Oxford Economic’s estimated 8.9 per cent baseline scenario.

Japan

Although Japan, throughout the pandemic, has managed to keep COVID-19 cases relatively low, it is still struggling with the vaccine roll-out and had reported a contraction in GDP of -5.1 per cent in first quarter of this year. The major reason behind delay in vaccine roll-out is that as of April 2021, the only available vaccine in the nation was that of Pfizer-BioNtech, and many local governments in Japan have been struggling to hire enough qualified personnel to administer the vaccines. The Olympic Games, scheduled to start on July 23, are expected to offer some economic boost to the city of Tokyo and consequently, the nation. The local governments of Tokyo and Osaka are currently pushing vaccination drive in preparation of Olympics and opening the city and make most of the coming opportunity for their economy.

India

The Ministry of Finance of the Government of India, on June 9, reiterating the importance of COVID-19 vaccine rollout, said that quickening the pace and coverage of vaccination is critical to helping India heal and regain the momentum of economic recovery. India will now have to work on two major blows from two different waves of the pandemic, and therefore vaccination becomes more important than ever to avoid another fatal wave. According to GlobalData forecasts, Hyderabad will lead economic recovery with a growth rate of 10.9 per cent in 2021, followed by Bengaluru at 10.6 per cent and Chennai at 9.9 per cent. The one thing common is that these cities are administering vaccines against the COVID-19 at full tilt. As of June 1, only 14.0 per cent of India’s population had been administered with at least one dose of the COVID-19 vaccine, and United Nations is expecting India’s GDP to grow at 7.5 per cent in 2021, given that the country continues its strive to vaccinate the population in earnest.

The International Monetary Fund labeled the projected decline in global economic activity due to COVID-19 pandemic as the Great Lockdown. In its updated and revised forecast released in April 2021, IMF had concluded that the global economy was improving due to the vaccination drives across the various developed nations like USA and UK, but cautioned that renewed waves of infections and new variants of the virus pose concerns for the activity. The forecast also stated that the economic recovery will be uneven across countries depending on their access to medical interventions, effectiveness of policy support, exposure to crosscountry spillovers, and structural characteristics entering the crisis. It projected India and China particularly to outpace the rate of global economic growth, experiencing a growth rate of 12.5 per cent and 8.4 per cent respectively in 2021.