Vaccination Will Affect Economic Growth

Gunay Guliyeva

Chief Analyst of CAERC

02 February 2021, 15:05

 Vaccination Will Affect Economic Growth

The World Bank projects that in case of broad application of vaccination the world economy will expand 4 percent. In its Global Economic Prospects report, the World Bank, the growth will be possible if countries implement economic reforms that contain the pandemic and increase investment.

 

The political and economic priorities for the near future are to control the spread of the Covid-19 pandemic and to ensure the rapid and widespread spread of vaccination. To support economic recovery, responsible government agencies should facilitate reinvestment in sustainable development that is less dependent on public debt.

Similar to other forecasts, the biggest risk to world economic growth is further spread of the infection and delay in vaccination. In such conditions, the world economic expansion may remain at 1.6 percent. According to the upside scenario, in case of gaining control over the pandemic and accelerating the vaccination process, the economic growth may exceed 5 percent. Along with the vaccination, the main source of recovering the economic growth that rapidly declined during the pandemic is increasing regional and global economic trust, consumption, and trade.

In macroeconomic scenarios for 2021 of various international organizations and think tanks the vaccination process is determined as the main factor to ensure economic recovery. The main risk to the economic recovery is financial crisis that may emerge due to weak banking system and economic vulnerability resulting from the further spread of the pandemic and delayed vaccination.

However, vaccination process meets certain barriers and restrictions. These can be related to supply and demand. Deman barriers may be caused by thought differences between countries on adopting vaccines.

On the other hand, population's desire to be vaccinated determines the demand for the vaccine. Given that in Azerbaijan, like in many other advanced countries, vaccination is voluntary, it becomes complicated to determine the demand. Today, one of the main research issues in behavioral economics is to study the factors affecting people's decision-making process. For example, the decision of people on getting vaccinated may be unstable, sensitive to processes happening in the world, as well as connected with the confidence in the government, health care system and pandemic control methods.

According to results the GALLUP International survey conducted in Azerbaijan, 86 percent of the population highly evaluate the activities of the government in this sphere. Azerbaijan ranks 4th in the world for this indicator. It means that Azerbaijan can serve as a model of rapid and effective vaccination formed as a result of government-citizen unity. On the other hands, barriers related to the supply cover such issues as the restrictions in stocking up and distribution of vaccines, maximum production potential of pharmaceutical companies, as well as storage and logistics.

At a time when all these global forecasts are being made, the world economy is facing a situation as frightening as a pandemic. Global discussions have introduced new concepts such as nationalization of vaccination and vaccine war.

At the moment, there are 5 main manufacturers of COVID-19 vaccines: Pfizer/BioNTech (USA-Germany), Moderna (USA), AstraZeneca/Oxford (Great Britain), CoronaVac-Sinovac (China), and Sputnik V (Russia). However, currently, total vaccine supply capacity of these 5 manufacturers cannot provide the entire world population in need of the vaccine.

Among them, Sinovac - one of the largest manufacturers, plans to combine the efforts of the 18 largest pharmaceutical companies in China and increase production to 2 billion doses only by the end of 2021. Given that the vaccines requires two dozes, only 1 billion people can be vaccinated. Also, we should take into account that it was forecasted by a company and may not be realized. The International Monetary Fund also informed on the inequal economic restoration depending on vaccine distribution. That is why at the moment there is a great struggle to produce vaccines. The most important is that the struggle is mainlly between rich countries. For example, the dispute between European Union and Great Britain that started on Brexit, which continued for 4 years and ended a few weeks ago, now became more intense because of the vaccine. Delay of Pfizer-BioNTech and AstraZeneca in vaccine procurement has negatively affected the argument. The fact that 13 percent of British citizens and only 2 percent of EU citizens were vaccinated demonstrates the  main indicator of big difference in the distribution of vaccines of both companies among countries. It is expected that 75 percent of British people will be provided with vaccines until July, in EU – until October. If lasy year world countries were interested in ththe way of combating COVID-19 pandemic, the biggest dilemma of 2021 is the choice whether a country or the planet should be vaccinated. The forecasts of interbational organizations demonstrate that until the world is not able to keep the COVID-19 pandemic under full control, the impact of the pandemic will be 1.2 dollars a year.

To ensure a fair distribution of vaccines, the World Health Organization (WHO) has formed the COVAKS initiative together with the Gavi Vaccine Union and the Epidemic Preparedness Innovation Coalition (CEPI). Azerbaijan is a member of this initiative as well. Within COVAKS initiative Azerbaijan will by 2 million dozes of Sinovac’s CoronoVac vaccine. It should be mentioned that Bill və Melinda Gates Foundation has estimated the cost of vaccinating low-income countries at 25 billion dollars. This sum contradicts 2.4billion dollars donated to COVAKS in recent months and 5.8 billion dollars added to the WHO's ACT-Accelerator scheme.

The fact that mostly rich countries are provided with the vaccines, i.e. the nationalization of vaccination, puts the world's population at great risk. Only international cooperation in the field of vaccination can save humanity from this disaster. Today, the main priority of rich countries struggling for the vaccine should set as their main priority to vaccinate not only their population, but some people in all countries.

In conclusion, the effects of today's vaccine struggle can be summed up in the words of Robert Yates, director of the global health program at Chatham House, “Science is succeeding, and solidarity is failing”. As President Ilham Aliyev stated that the global economy will not recover unless world countries abandon their selfishness and start cooperating for the vaccination. Following Chief Economist of the IMF Gita Gopinat’s approach, quick access to vaccines, provision of fiscal support and accommodative monetary policy will play the main role in the recovery of global economy. Being one of the first countries to vaccinate, Azerbaijan considers continued fiscal expansion and soft monetary policy as the most appropriate "recipe" for the recovery of the national economy.

 

 

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