Vaccines for COVID-19 have already been invented: will they save the global economy

The emergence of several vaccines at once has encouraged countries exhausted by the coronavirus. Vaccinations promise a return to normal life in the near future after months of lockdowns, writes Air force... But will they save the global economy from the biggest crisis of the century?

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A large-scale crisis interrupted a multi-year increase in wealth in the world, set most countries back a few years ago and has already cost taxpayers $ 12 trillion. It will be necessary to spend more on anti-crisis measures, despite the fact that incomes are shrinking: the world will miss $ 28 trillion in five years, the International Monetary Fund calculated.

There is less and less money left for life and development, and debts are growing - in 2020 they will increase by another $20 trillion and exceed the annual volume of the world economy by three and a half times.

Since this crisis has only one cause: a virus, the news of the emergence of several working vaccines caused a surge of joy in financial markets. Those with money have placed bets on future growth in business and household incomes. Economists, officials and central bankers - those responsible for financial stability and providing anti-crisis assistance - reacted much more restrainedly.

The head of the American Central Bank of the Federal Reserve, Jerome Powell, the most influential and cautious banker in the world, capable of bringing down world markets with one word, called the vaccine “good and long-awaited news,” but made a reservation: it will affect the economy in the medium term, and not in the near future.

His colleagues in Europe, the world's second largest economy after the United States, are also in no hurry to book a banquet to mark the end of the crisis.

“The arrival of a vaccine changes the view of how the situation will develop towards the end of next year and into 2022, rather than in the next six months,” said Irish economist Philip Lane, who sits on the board of the European Central Bank.

The head of the IMF, Kristalina Georgieva, agrees with the bankers who print dollars and euros. In a message to the leaders of the G20 countries, she pointed to the autumn slowdown of the economy, which had revived in the summer. The second wave of the pandemic is to blame.

“A medical solution to the problem is already visible, but the path to economic recovery remains difficult and fraught with disruption,” warns the head of the IMF.

Light at end of tunnel

It turns out that the vaccine will not save the world economy from the crisis until the mass vaccination begins? Not at all, say economists whose glass is half full.

“There is some good news, such as the announcement that several vaccines are likely to be approved soon. From this point of view, the light at the end of the tunnel is already visible,” said Fabio Panetta, one of the leaders of the European Central Bank.

The American economist James Ballard, who heads one of the federal reserve banks in the United States, put it in the same words:

“It looks like there is light at the end of the tunnel. The way out of the crisis is visible, now this is a very realistic point of view on the situation.”

What adds to their optimism is the fact that the vaccine has a beneficial effect on the economy long before it eliminates the main cause of the crisis - the pandemic. And that's why.

Business activity is stifled as businesses and people have lost confidence in the future (which makes them spend less) and the authorities are afraid of the uncontrolled spread of the virus (which forces them to impose a lockdown). The availability of a vaccine nullifies these two risks even before vaccination becomes widespread.

On the subject: 'Help is on the way': 20 million Americans will receive the COVID-19 vaccine by the end of the year

Vaccination gives people and business hope that there will be no new lockdown. They start to spend the saved during the quarantine and postponed for a rainy day, which increases consumption. And again they are investing in the future (expanding the business, buying real estate), which spurs investment.

Consumption and investment are the two main components of economic growth. They are the ones who suffered the most during this crisis. The other two - trade and production - did not decline as much, and have been recovering vigorously since the summer.

In general, the vaccine will allow the world to reduce losses from the current crisis by $ 9 trillion in the next five years, the IMF calculated.

But it will get worse first

However, on its way to light, the world economy will have to stumble once again in a dark tunnel this winter, warn those with half-empty glass. This stems from the second lockdown in Europe and the unbridled second wave of the pandemic in the United States.

America and the European Union account for more than a third of the world's wealth. They are the main source of effective demand and investment on the planet, and therefore the health of the entire global economy depends on their well-being. Without them, the countries that defeated the pandemic, primarily China, will not be able to fully recover their losses, although they will return to growth this year.

And here the news is not important. While the world was loudly celebrating vaccine after vaccine, economic statistics this week quietly and persistently confirmed the words of the head of the IMF that the recovery will be accompanied by relapses of the crisis.

The 19 European countries where the common euro currency circulates are showing signs of a new recession, a monthly analysis of consumer and business sentiment published on Friday, November 27, showed. The situation is similar in the United States: in November, growth expectations gave way to pessimism. True, Americans were surveyed even before the announcement of the triumph of pharmaceuticals.

Economists at Bloomberg Economics predict another recession for the barely recovered economy. They came to this conclusion based on the analysis of large amounts of data on business and consumer behavior - an innovation in economic statistics in the era of mobile Internet and geotagging that has gained popularity during this pandemic.

Their findings are supported by the business hardest hit by the coronavirus.

The second wave and the subsequent lockdown in Europe exacerbated the suffering of shops, restaurants, hotels and interrupted the recovery of entire industries like tourism and entertainment.

Airlines, which have severely cut costs, flights and staff, continue to incur colossal losses. Moreover, if in the summer the International Air Transport Association (IATA) predicted them to lose 100 billion dollars in the current and next years, then this week in the updated forecast the estimate is one and a half times sadder - more than 150 billion.

A fresh survey of people and businesses in the eurozone dispelled hopes for a quick revival of consumer demand, the main driving force of developed economies. In November, it indicated a decline for the first time since the spring.

The main problem is consumer uncertainty about the future. It has worsened, despite the vaccine, as the delayed consequence of any economic crisis, unemployment, gradually but surely materializes in Europe.

Let the economy of the Old World fell no less than the American one, but the surge in unemployment in Europe was much more modest than in the United States. It's all about doping.

The EU countries artificially supported employment and business in general with money. And as soon as the authorities begin to curtail these programs along with the lockdown, not everyone will survive without state support.

It is not for nothing that in the above-mentioned study of business and consumer expectations in the eurozone, the employment index is deteriorating for the second month in a row, indicating an impending surge in unemployment and, consequently, a reduction in consumption.

Another crisis year

All this confirms the fears of economists: the second wave of the coronavirus raised the second wave of the economic crisis.

But there is good news as well. The repeated shock promises to be much weaker than the primary, spring shock. Thanks to the fact that entire industries have learned to live in a pandemic.

First of all, this applies to industry. Factories are operating at full capacity, and countries in whose economies production plays an important role (primarily Germany) are recovering from the crisis faster than those who are focused on the service sector (like Spain or Greece, which are dependent on tourism).

The shock will not only be weaker, but also shorter: the number of infections in Europe is declining, and the lockdown has already been removed almost everywhere.

The advice of epidemiologists did not stop the Americans - the roads were traditionally busy before Thanksgiving; many went to visit relatives.

And when the second wave of the coronary crisis subsides, the return to the previous rate of growth of wealth in the world will directly depend on whether the West has enough money to support the economy on artificial respiration until the end of the pandemic.

For example, the rich countries of the world supported the population and business so powerfully that, despite the economic decline by 10%, the income of the population did not decrease, but grew by more than 5%.

The speed of recovery from the crisis will depend on the willingness and ability of the authorities to continue this support - from taxpayers' funds and in debt.

There are small problems with this In America, a new trillion dollar bailout package was stuck in Congress at least until Joe Biden's inauguration in late January. And in Europe, the € 2 trillion anti-crisis budget has run into disputes with Poland and Hungary over the rule of law.

And even if the money is found, it will be possible to talk about a return to normal life and a way out of the crisis only when the coronavirus turns from the plague of the XNUMXst century into a common disease like the flu. And it is better if this happens before the problems of the population and business lead from an economic to a financial crisis, the European Central Bank warned.

On the subject: COVID-19 Three Vaccine Race: What You Need to Know About Each Drug

The situation in America is even more fragile than in Europe. In addition to political aggravation due to the elections, the United States is experiencing not a recession, but an increase in the number of infections. Epidemiologists predict another surge as Americans disobeyed their advice and traveled en masse across the country to visit their families on Thanksgiving Day.

“The virus is spreading at a rapid pace, and the next few months will be very difficult,” said the head of the US central bank, Jerome Powell. “We have always said that the economy will not fully recover until people start avoiding crowds.”

It will not be possible to quickly return to pre-crisis growth rates and start fighting off the $ 28 trillion that was not received during the illness.

“A full recovery of GDP to 2019 levels will not happen until the fall of 2022,” said Philip Lane of the ECB. “We don’t think that everything will suddenly go back to the way it was before COVID-19. Because the pandemic will have a long-term impact on consumer confidence, savings and employment. The vaccine will not help this.”

“Even in the most optimistic scenario, mass vaccination will take a long time,” agrees his colleague Fabio Panetta. “And it will take even longer for the population to believe that everything is behind us.”

“In other words, we are in for another ‘pandemic year’ in 2021,” Panetta said.

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