Will The Pandemic Continue In 2022?
Dear Rich Lifer,
Vaccination timelines are slipping in many countries around the world, giving rise to fears that the battle against the virus will continue into 2022.
Even further, the economic effects could be felt into next year… and beyond.
The U.S. and other countries are making progress with vaccine distribution. In fact, President Biden announced he hopes to vaccinate 300 million Americans by the end of the summer or early fall 2021.
However, many other countries, from Germany to Mexico, are facing serious problems vaccinating their populations.
At the current rate of vaccination, only about 10% of the world would be inoculated by the end of the year and 21% by the close of 2022, according to data from UBS. Only 10 countries are currently on track to vaccinate more than one-third of their population by the end of the year.
The UBS data shows both hard-hit middle-income countries like South Africa and richer regions in Europe facing delays. European officials had a goal of vaccinating 70% of the population by summer; however, vaccines are running out in certain areas, and only 2% of European Union residents have been vaccinated so far.
The vastly different paces of vaccine rollout raise concern regarding the state of the global economy. This could mean that even if the U.S. is successful in achieving herd immunity, economic recovery may be delayed while we wait for the rest of the world to catch up..
Erik Nielsen, chief economist at UniCredit Bank, warns, “So long as the pandemic terrorizes part of the world, normality will not be restored anywhere.”
IMF’s Economic Predictions
Growth in America is still projected to be strong in 2021. The International Monetary Fund forecasts global output is projected to grow 5.5% this year, up from their October forecast of a 5.2% increase. The IMF also expects the U.S. economy to grow 5.1% this year.
The IMF said these updated projections assume, “broad vaccine availability in advanced economies and some emerging market economies in summer 2021 and across most countries by the second half of 2022.”
However, recoveries of the eurozone and developing economies have become increasingly unpredictable due to vaccination delays. IMF Chief Economist Gita Gopinath said, “There remains tremendous uncertainty, and prospects vary greatly across countries.”
In much of Europe borders are closing. In New Zealand, international visitors will be barred through most of 2021. Even Israel — the world’s fastest vaccinating country — remains in a lockdown with international flights banned indefinitely.
A Domino Effect
It’s easy to look at issues with vaccine production and see the clear domino effect it’s having.
For example, due to production issues in European factories, the EU introduced measures to block exports to wealthier countries like Canada, Japan, and the U.S.
China’s production challenges also have a ripple effect. According to Trivium, a Chinese consultancy, vaccine approvals and production arrangements are coming more slowly than anticipated. Trivium estimates that a total of 850 million doses is optimistic for what is possible for China this year (at least 1.68 billion doses are needed for full inoculation).
This now affects Morocco, which planned to vaccinate 80% of its population with Chinese vaccines that are now significantly delayed.
We see this pattern playing out all over the world. Like in Argentina, which planned to receive five million doses of Russia’s Sputnik V vaccine in January, but only 800,000 have been delivered because of production delays in Russia.
These hits to more advanced economies are already being felt by developing countries. The World Bank has forecast that remittances to the developing world—a vital lifeline—will fall 7.5% this year, after a 7% drop in 2020.
So it should come as no surprise that a new study led by a University of Maryland economist suggests the U.S. should be concerned about vaccinating people outside its borders…
“Wealthier Nations Have Just as Much To Lose”
Economics Professor Sebnem Kalemli-Ozcan and colleagues at the University of Koc in Istanbul analyzed 35 industries in 65 countries and how they were linked economically before the pandemic in 2019.
They then used data on COVID-19 infections for each country to show how the coronavirus pandemic disrupted these links and how vaccinations could help fix the damage.
The results of the study revealed that if wealthier nations are fully vaccinated by the middle of this year and developing countries vaccinate only half of their populations, the global economic loss will amount to around $4 trillion. Further, advanced economies including the U.S., Canada, Japan and Europe would shoulder about half of that loss.
In an even worse case scenario, the study showed that if the U.S. and wealthier nations aren’t able to vaccinate the majority of citizens before the end of 2021 and developing countries receive no vaccines this year, the shock to the global economy could result in $9 trillion in losses.
Wealthier nations have just as much to lose as less developed countries if vaccinations are not distributed equitably around the world. It would cost countries like the U.S. less to invest in providing vaccines to poorer countries than the potential economic loss they would incur if trade partners like Mexico or Brazil can’t recover from the pandemic.
At a World Health Organization press conference last week, Kalemli-Ozcan explained that widespread vaccinations in wealthier countries will certainly help domestic businesses like restaurants and gyms recover more quickly. However, industries such as automotive, construction and retail that depend on outside countries for materials, parts, and supplies will continue to suffer if vaccines are not made available worldwide.
The study was published by the National Bureau of Economic Research, and its European counterpart, the Centre for Economic Policy.
President Joe Biden has announced that the U.S. intends to join COVAX, an initiative with the goal to vaccinate at least 20% of the population of every country by the end of 2021.
However, the initiative is currently lacking in billions of dollars of necessary funds to see this goal to fruition.
Kalemli-Ozcan warned, “No economy is an island.”
To a Richer Life,
The Rich Life Roadmap Team