Powerscourt Coronavirus Briefing – 18 January 2021

The equity markets may give a different impression but the pandemic has devastated the global economy – or most of it. The latest indicators emerging from the Eurozone suggest the bloc is heading for a double-dip recession despite unprecedented levels of intervention.

The EU’s €750 billion COVID-19 recovery fund, agreed last year, means that, for the first time, the European Commission will borrow on the markets and disperse grants and loans to the worst affected countries. The hope is that long after the coronavirus crisis has abated, the unprecedented move will buttress the fiscal and economic foundations of the bloc. Meanwhile, the Biden administration has unveiled a €1.9 trillion fiscal stimulus package to combat the effects of the virus. The UK is experiencing its worst recession in 300 years.

Not all countries have been hit hard. According to the Financial Times, China’s economy expanded at a faster pace in the fourth quarter than it did before the pandemic – growing at a rate of 6.3% over the three month period. However, a separate story in the same paper reports that 109 new cases have been detected in Beijing and three other provinces, prompting fears the economic recovery could be halted by further lockdown measures.

Against this backdrop, the benefits of a successful vaccine rollout are clear. Economies cannot begin to recover until restrictions are lifted. But with new strains of the virus, which are much more infectious, sweeping through most countries, the process of opening up economies is tricky.

The UK continues to lead the way among larger developed countries. The Telegraph reports that as of today another 5.6 million adults will be invited to get their jabs, including one million clinically extremely vulnerable people who have been shielding and 4.6 million over 70s in England. Dominic Raab, the foreign secretary, has said that a tiered lifting of restrictions will begin in early spring. The Telegraph is also reporting that mass testing of regions will be considered as part of the roadmap out of the lockdown.

But economic recovery will not reach a sustainable footing until all countries have conquered the virus. Bloomberg is reporting that vaccine disparities could lead to a more dangerous phase of the pandemic as the virus will continue to spread in developing countries that lag behind in inoculation programs. The fear is that the virus could mutate into more potent forms in these countries, which would compromise the immunity built by vaccines in developed countries.

“We cannot leave parts of the world without access to vaccines because it’s just going to come back to us,” said Charlie Weller, head of vaccines at health research foundation Wellcome. “That puts everyone around the world at risk.”

Russia and China are trying to meet the appetite for vaccines among developing countries. Russia’s Gamaleya Research Institute has agreed to sell its Sputnik V vaccines to countries including Algeria, Argentina, Saudi Arabia and Brazil. Chinese manufacturers have signed deals with more than a dozen countries including Bahrain, UAE, Egypt, Phillipines, Indonesia and Hungary.

However, the Sinovac jab has been mired in controversy after Chinese scientists initially claimed that it had a 78% efficacy rate in trials in Brazil, but later clarified that it had a ‘generalised efficacy rate’ of about 50% – marginally above the threshold required for a vaccine to be considered viable.

Dismal US retail figures released on Friday, combined with growing fears that the Biden Administration will not be able to pass its stimulus package through Congress because of Republican Party opposition, triggered a sell off in shares, but markets recovered in overnight trading on the back of much better than expected Chinese growth figures.

WHAT ARE COMPANIES SAYING?