The evolution of the pandemic in the most populous and exposed economies such as India forces us to reconsider what is necessary and what is urgent.
With the limited availability of vaccines, the possibility remains for new uncontrolled outbreaks and variants such as those that have already emerged in the United Kingdom, South Africa, India and Brazil. Vaccination provides hope for countries in the developed world that have immunization programs in place. However, given that only 0.3 percent of all vaccines administered are given to people in low-income countries and that some developed countries, such as Japan and New Zealand, have vaccinated less than 4 percent of their populations, there is still a long way to go.
Vaccines used in the US, UK and EU seem to be effective against COVID-19 variants, such as the UK B 1.1.7 variant. However, the longer major outbreaks last, the greater the possibility of a new variant that may thwart existing vaccines and, therefore, further slow down economic recovery.
Will receiving a vaccine and having the documentation to prove it be made mandatory for traveling abroad or returning to the workplace?
Countries with high vaccination rates could start lifting domestic lockdowns. However, tight restrictions on international travel will almost certainly continue until national governments are confident that they can properly manage new infections. This hesitation to reopen borders may delay emerging markets’ return to economic growth.
The vast majority of economies reliant on tourism are battling to establish guarantees, such as proof of vaccination, that will enable them to benefit from the summer holiday season. But tourism is only a small part of the equation. Will receiving a vaccine and having the documentation to prove it be made mandatory for traveling abroad or returning to the workplace? How will the duty to monitor vaccinations be divided between companies and governments? Will companies return to the pre-pandemic status quo or will they have to rethink their operations? The administrative and economic burden on businesses is likely to be high, but it is an unavoidable necessity for economies like Spain that are greatly dependent on the tourism sector and the close contact industry in general.
All of this forced us to consider a stressed scenario in the latest Outlook report by MAPFRE Economics. This scenario envisages problems arising with the effectiveness of vaccines (resulting from rollout, side effects, skepticism and virus mutations), although this is still not very likely. This would significantly erode many consumers’ and producers’ trust, and the scars left by the crisis would become more evident. This would in turn lead to further shrinking of activity, delaying recovery to pre-pandemic levels by an additional 12 to 18 months (according to this scenario) and, more importantly, causing some problems, which are currently temporary, to grow into prolonged fiscal and financial sustainability issues, lower potential growth and private sector insolvency.
This is why, even in a more benign situation like the present one, by looking at the warning signs, we can distinguish what is important from what is urgent and essential, accelerate the rate of global vaccination, reduce uncertainty and get to work to make up for lost time.