VACCINATION FOR THE WORLD ECONOMY

Large-scale pandemic crisis has set the global economy back several years. According to analysts, the global economy will take more than a year to recover from the consequences of lockdowns of the past two years.

But there is a growing hope that the recovery process will reach the rate required to make sure that the governments can fulfil their social and other obligations, prevent massive unemployment and rising poverty levels. Vaccines have become a magic wand in this situation, as they are considered a prerequisite for the return of the world to normal life.

However, the process of curing the global economy is very slow. Experts warn that if the uneven distribution of vaccines among countries continues, no obvious progress should be expected.

Despair of the Poor

Statistical analysis of American economists shows that there is a significant relationship between the number of daily infection cases, death rate, and fall in stock markets. Moreover, this dependence is more noticeable when analysing global data. In other words, the more new infections, the greater the volatility in financial markets. The higher the death rate from coronavirus, the greater the volatility.

The pandemic had a negative impact on almost all sectors of the economy.

However, unlike the first year of the pandemic, when the hopelessness contributed negatively to the crisis situation, with the release of the first doses of vaccines, the mood and forecasts began to improve. “Vaccination policy this year, and maybe next year is an economic policy and it may be even more important than fiscal and monetary policies in terms of overcoming the crisis,” said Kristalina Georgieva, Managing Director of IMF...

According to Bloomberg, as of September 14, 2021, more than 5.7 billion doses of vaccines have already been used in 184 countries. China ranks first among the leading countries in terms of vaccination rates (2.2 billion doses). It is followed by India and the EU countries with 750 million and 560 million doses, respectively.

In general, the process of developing and producing effective vaccines in a relatively short period of time can be considered a kind of record in the history of world pharmaceuticals.

Four companies will be able to supply 30% of the world's population with both doses of vaccines by the end of 2021, according to a study published in Nature. A study by the Global Center for Health Innovation at Duke University (USA) showed that by 2023-2024 the population of low-income countries will have difficulty getting even one dose of the vaccine - they will have to wait a long time.

Commenting on the current situation, WHO Director General Tedros A. Gebreyesus said: "The world is on the verge of a tragic spiritual abyss."

Distribution of vaccines around the world is uneven, hence threatening with huge social and economical problems. A complete victory over the pandemic is possible only in case of a coordinated and equitable distribution of vaccines.

It is expected that by the end of this year the pharmaceutical companies AstraZeneca, Pfizer and Moderna will be able to produce vaccines for 2.6-3.1 billion people, while the Russian Gamalei Research Centre is able to provide only 500 million people with its own vaccine. However, agreements with manufacturing companies signed by the 27 EU countries and five other wealthy countries will give them control over most of the produced vaccines. Population of these countries is only 13% of the global population.

So, with a total population of 40 million people, the volume of vaccines purchased by Canada will be enough for 154 million people, or 9 doses for each citizen of the country. Great Britain and Australia purchased vaccines for 295% and 269% of their population, respectively.

Poor countries, on the other hand, may only hope for vaccines from the WHO’s Covax program. Under this $38 billion-worth program, it is planned to vaccinate 20% of the world population. However, due to the passive participation of rich countries in the program, it has not yet been possible to collect the necessary funds...

Manipulations of the Rich

Many analysts frankly admit that if in the 1970s the future of the world economy depended largely on oil and the concentration of oil resources in the hands of a very small number of countries created conditions for manipulating global economic development, in our time the future of the world economy depends on vaccines. As in the 1970s, concentration of vaccine production in the hands of a small number of countries and the monopoly established on their production by major economic powers threaten both social life and economic development trends.

Managing Director of IMF also openly stated that the difference in the rate of vaccinations between the countries threatens global stability, noting that the US economy, thanks to vaccinations and recovery growth, could grow 7% this year - more than at any time since the 1980s. “This is good news for Americans. The economic impact will spread to the rest of the world. But at the same time, there is a duality in vaccination, when many countries, even the developing countries, are lagging behind in vaccination and this delays their economic recovery,” said Georgieva.

According to her, if such a difference persists, this may cause the advanced economies normalise their monetary policy in 1-2 years; in particular, the US Federal Reserve rate will rise slightly. At the same time, emerging economies will not grow and it will become more difficult for them to service dollar-denominated debt. “This is a danger to the integrity of growth, global stability and security,” K. Georgieva said.

Meanwhile, according to the World Bank, the growth of the world economy by the end of this year will be 5.6%. Again, the main reason will be the accelerated recovery of rich countries in the post-pandemic period. While in poor countries with a slow vaccination process, we will observe  completely opposite processes.

Developed and developing countries are closely linked by economic ties. Therefore, the completion of the vaccination process only in developed countries does not mean the restoration of their economic activity.

This is clearly seen in the results of a study by the Economist Intelligence Unit (EIU), an analytical division of the British The Economist. “In countries where the level of vaccination fails to reach 60% by the middle of next year, the total decrease in GDP will reach $2.3 trillion in 2022-2025,” the study notes.

First of all, this concerns developing countries, where a significant part of the population has not yet had time to receive even the first dose of vaccines. Emerging markets will account for two-thirds of the losses in the global economy, the EIU notes.

The economy is common

Apparently, the developed countries, as leaders in vaccination, seem to forget about how interconnected the world economy is. For example, today there are close economic relations between the EU and Turkey. The EU market plays a key role in Turkey's exports, which in turn is one of the main sales markets for the EU. This means that the completion of the EU vaccination process and its return to normal amid the protracted pandemic situation in Turkey will have a negative impact on European imports and exports.

The same is true for the worsening pandemic situation in Russia and Ukraine, which are the main export markets for Azerbaijan's agricultural products. Re-closure of these countries will reduce demand in the catering sector, which may decrease imports from Azerbaijan. Therefore, Azerbaijan is interested in the early improvement of the pandemic situation not only at home, but also at its main trading partners.

In other words, it is very important that the countries get out of the existing situation synchronously. In addition, if the delay in recovery in developed countries adversely affects mainly the heavy industry, IT industry and high technology, then in developing countries the services sector will be the most affected.

The results of a study conducted by a group of economists led by Professor Selva Demiralp of Koç University (Turkey) on the impact of uneven vaccination on sectors of the world economy can be grouped as follows: delays in vaccination are more damaging to the economies of developing countries; in developing countries, the greatest losses will be observed in the services, tourism and entertainment sectors; in developed countries, the largest losses are incurred by sectors linked to value chains with economic sectors of developing countries, including the automotive industry, metallurgy and equipment manufacturing.

“The world will never be the same” is the most common phrase of recent years, often bearing a negative connotation. And it would be better both for the world and global economy that countries and governments realise how interconnected they are, and learn to help each other in trouble...