Powerscourt Coronavirus Briefing – 25 January 2021

The annual World Economic Forum (WEF), which is usually held in Davos, Switzerland, will be held online this year and opens today.

The pandemic will dominate the agenda. Oxfam, the development charity, released a report to coincide with the start of the WEF which claims that global inequality has widened over the past year as the number of people living in poverty has doubled to 500 million, while the wealth of billionaires has surged during the crisis. It says the increase in wealth amassed by the ten richest billionaires would pay for vaccinations of the world’s poorer nations.

The World Health Organisation also releases a report today tapping into the same theme. It says that the world’s richer nations cannot begin to recover from the pandemic until poorer countries have been given equitable access to vaccination programmes, because of damage to trade links and the ever-present threat of new variants of the virus spreading.

However, gaps are developing among OECD countries that could have significant consequences. The EU is lagging well behind the UK and the US as its vaccination program has been hit by a number of setbacks. The latest was the bombshell dropped by AstraZeneca on Friday night that scheduled deliveries to the bloc could be 60% lower than planned over the first quarter. The European Medicines Agency is expected to authorise the Oxford jab this week. The vaccine was central to the European Commission’s pledge that 70% of adults will be vaccinated by the summer.

The move inevitably prompted a furious backlash among member states with Italy, among others, threatening legal action. Commission officials will hold talks with AstraZeneca today with a statement expected later providing clarity on future supplies.

If the botched rollout of vaccines is delayed further, then the economic and societal costs for the EU will increase.

Element, the hedge fund, is warning that investors and policymakers are underestimating the economic impact of the pandemic on the EU, particularly the new strain of the virus which will require member states to impose stricter lockdowns for longer than originally expected. Christine Lagarde, the President of the European Central Bank, said on Friday that its 3.9% growth forecast for the EU remained “broadly valid.” Colin Teichholtz, the Head of Markets at Element, told the Financial Times that the ECB’s forecast is too optimistic and should be cut by a quarter.

Last night there were riots in Holland as protesters mobilised against the new curfews. Politicians have warned that frustration is growing in France at the slow rollout of vaccines which could also erupt in widespread unrest.

In the UK, the debate about when schools should reopen is intensifying. However, an analysis piece in the New York Times warns that the new variant of the virus means Britain could be entering a severe new phase of the pandemic and that easing lockdown rules could be calamitous.

Over the past week markets have surged to record highs on hopes that the $1.9 trillion fiscal stimulus package unveiled by the Biden administration combined with the strong performance of the Chinese economy, will lead to a global rebound in the second half of the year. These gains have been checked by concerns over new variants of the virus emerging combined with the slow rollout of vaccines. Asian shares climbed to near all-time highs in overnight trading as optimism over China and the US fiscal stimulus eclipsed concerns over vaccine supplies.

WHAT ARE COMPANIES SAYING?