Coronavirus recovery: vaccine success can help make up for prevention failures

Economies that have failed to control the coronavirus so far might be able to compensate by running ahead with their rate of vaccinations
Those who can catch up at this part of the global race against Covid-19 have a good chance of emerging from the pandemic stronger

Tai Hui

Published: 4:00pm, 2 Apr 2021

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More than a year into the Covid-19 pandemic, the multi-speed global race to vaccinate populations around the world is now setting the stage for the next challenge of returning to normalcy for economic as well as public health.

There are four broad groups of economies in terms of performance. Those economies that have failed to control the virus so far might be able to compensate for their poor performance by running ahead with their rate of vaccinations.

The first group, including China, has led the initial stage of containment by a long way. China was able to limit the spread of the virus with stringent border controls and lockdowns of cities that suffered outbreaks. By the second quarter of 2020, economic activities were starting to rebound and China’s recovery was largely complete by the end of the year.

Its success in containing the outbreak also means the local population might lack the urgency to get vaccinated. So far, China has administered almost 115 million doses. It aims to get 40 per cent of the population vaccinated by June, which implies a daily vaccination count of 10 million. As immunity from available vaccines requires two injections, 40 per cent of the population would imply a total of more than 1.1 billion doses. This will require a significant step-up in production and logistics.

The second group are those countries that have suffered significantly in the past 12 months but made considerable progress in vaccinating their populations, such as the United States and Britain. The US has already administered 147 million doses of vaccine, and more than a quarter of its 330 million people have already received at least one dose.

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For the UK, more than 45 per cent of the population has already received at least one vaccination dose. Alongside other countries that have also seen a large population receiving the vaccine, evidence suggests inoculation helps to reduce infection and hospitalisation.

US President Joe Biden has doubled his target and aims to administer 200 million vaccine doses in his first 100 days as president. At this pace, more than half of the US population should gain protection against the virus by this summer, either from vaccination or infection.

This means the US and UK economies could see strong rebounds in the second half of 2021 as better-protected populations allow for more service sectors to reopen sustainably. While vaccination does not completely eliminate the risk of outbreaks, it helps to weaken the chain of infection and ease the burden on medical services.

The third group of countries and economies are those that have been able to limit local outbreaks in the past year but have been slow in getting their populations vaccinated. Many Asian economies fall into this category.

For economies such as Taiwan and some Southeast Asian countries, the issue is the lack of sufficient vaccine supply. For Hong Kong, Japan and South Korea, negative perceptions, fear of side effects and lack of urgency have meant take-up has been slow.

Tourism and business travel are important contributors to these economies. Low vaccination rates around the region could delay the recovery of international travel, leaving their tourism industries lagging.

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The “vaccine passport” is one possible solution to incentivise vaccination, but governments are still working out a realistic framework. Once the prospect of more accessible overseas travel returns, this could persuade more people to be inoculated.

The final group of countries have suffered in the outbreak in the past 12 months and unfortunately are also falling behind on the vaccination effort. The European Union, with a population of more than 440 million people, has only administered 72 million doses of vaccines, or less than half of the US total. Progress has been delayed by confusion over vaccine distribution and public scepticism.

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This coincides with a fresh wave of outbreaks in Germany, France and other European countries. This means the EU’s recovery will lag the US, potentially meaning many European countries could miss out on the peak summer travel season.

While Europe’s vaccine problems might delay recovery by a quarter or two, the end is also far from being in sight for many emerging economies. Many of them – such as Brazil, the Philippines and India – are experiencing new waves of outbreaks.

The road to recovery is long and uncertain. Some governments, such as Brazil, could be tempted to rely on government spending to support the economy while running up more debt, which could be a problem in the long term.

Vaccinations are not a magic wand that will make the pandemic disappear, and there is still much to be studied by scientists and medical experts on how to contain the virus. Yet, it is a potent tool to restoring some degree of normality to our daily lives and economic activities. Those who can catch up at this part of the race have a good chance of emerging from the pandemic stronger.

Tai Hui is chief market strategist for the Asia-Pacific at JP Morgan Asset Management