Home > Mediocre Economic Recovery As Vaccination Efforts Take Time

Mediocre Economic Recovery As Vaccination Efforts Take Time

When the world found out for the first time that vaccines are effective against COVID-19, the stock market rallied sharply. Back in November last year, every week for three weeks in a row, there was one announcement of an effective vaccine being discovered. 

In this order, Pfizer-BioNTech, Moderna, and AstraZeneca brought hope that the pandemic will end. Naturally, the stock market was the first one to react, as the “long humanity” bet paid. Hopes for a V-shaped recovery were stronger than the elevated valuation for most of the companies publicly traded on stock exchanges.

Economic Growth Likely to Be Downgraded

Since November, the world began preparations for the most daring logistic task ever – the rollout of the vaccine. The process is complex and requires huge resources. At the same time, pressure builds as the virus mutates quickly. A new variant, B117, discovered for the first time in the United Kingdom, spreads faster. Hence, the speed of vaccination should increase exponentially should the world want to reach immunity by the end of the year.

So far, with a couple of exceptions (e.g., Israel, United Arab Emirates, Bahrain, United Kingdom), the pace is slow or very slow. Lack of communication and unprepared governments, plus the lack of infrastructure, led to very poor numbers. Every day counts as the second wave of the pandemic ravages European nations and the United States.

Portugal announced a new lockdown, Germany extended its lockdown until April, Spain suffers from the worst winter in the last twenty years, the United States goes through one of the major political crises in its history – all these point to anything else but a V-shape recovery. As such, the risk is that economic growth will likely be downgraded.

Only five countries in the European Union saw their infection rate slowing down last week. Governments appear to be reactive and slow, while the virus spreads faster. Europe and the United States face a crucial moment – a decisive one for both the healthcare system and economic recovery.

To fight the pandemic, any jab administered matters. Also, any jab taken gets us closer and faster to get back the lives lived before the pandemic. It will be a hard, slow, and painful economic growth – not the V-shape recovery the markets cheered for last November.

Calibrating expectations for 2021 economic growth is the wise thing to do, as having a cure and administering it in due time are two different things.

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