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The renewed increase in Covid-19 infections threatens to further divide the world economy between rich and poor, potentially damaging global growth if the new outbreaks spread or if the main sources of demand falter.
More people have been diagnosed Covid-19 last week as any other since the pandemic began. The World Health Organization warned this week that new infections are on the rise everywhere except in Europe, led by rising numbers in India, with cases also on the rise in Argentina, Turkey and Brazil.
It is casting a shadow over a previously powerful global economic downturn, as failure to control the virus or distribute vaccines evenly could drive new mutations, first in emerging markets and then to developed countries facing the pandemic. struck back.
Even if this does not happen, a two-speed recovery will keep even vaccinated countries in check by limiting foreign demand for their goods and destabilizing supply chains. The International Monetary Fund said last month that the recovery would miss $ 9 billion by 2025 unless faster progress is made to end the health crisis.
Global setback
The IMF predicts that growth in 2021 will be the lowest since at least 1980
Source: International Monetary Fund
Emerging and developing economies was two-thirds of global growth before the pandemic and about 86% of the world population. The World Bank just told them this week that they should prepare yourself for the possibility that their recovery will lose steam. A burgeoning economic revival in India – the sixth largest economy in the world – is threatened by renewed movements in the provinces to stem a new wave of infections reached 200,000 daily daily in the last week.
“The new business rises are a test of reality for the world economy, because it is clear that the pandemic is nowhere near,” said Tuuli McCully, head of the Pacific economy at Scotiabank. “Many lower-income economies are still facing serious Covid-19 challenges and have a long way to go before returning to ‘normal’. ‘
Healthcare workers are preparing to administer Covid-19 vaccines to residents at a vaccination site in Richmond, California on April 15.
Photographer: David Paul Morris / Bloomberg
According to data collected by Bloomberg, more than 944 million vaccinations have been administered in 170 countries – enough doses for 6.2% of the world population. But the distribution is skewed with the countries receiving the highest incomes vaccinated about 25 times faster than those with the lowest.
“I see it as a race between virus mutations and vaccine explosions,” said Rob Subbaraman, head of global market research at Nomura Holdings Inc. ‘Many people do not know that the Spanish flu apparently started in the USA in 1918 and then spread to Europe, in the end it was the countries that suffered the most in emerging markets. It is an ominous sign that history repeats itself. ‘
Markets are showing signs of turmoil. An Asian equities benchmark is lagging behind its global counterparts this month, while the Indian rupee is the weakest currency in the region this week. Investors have sought traditional havens such as the Japanese yen and rewarded those with better records for managing the outbreak, such as the Israeli shekel, the Taiwanese dollar and the British pound.
Businesses that are particularly reliant on a reopening of the world economy are particularly vulnerable, and the latest surge in infection is overshadowing a “price to perfection reopening business”, said Stephen Innes, chief global market strategist at Axicorp Financial Services Pty Ltd. in Sydney, written in a note to customers.
Great expectations
The IMF predicts that the world economy will expand 6% this year
Source: International Monetary Fund
“The striking problem is that, despite strenuous efforts by the medical community around the world, we are not even close to calling it a day, so that people can start again or get on with things more productively,” according to Innes.
The spread of business threatens the prediction of a V-shaped recovery for global growth, led by the US and China. The IMF currently expects the world economy to grow by 6% this year, the most in four decades’ data. But it knows that the longer the pandemic runs, the harder it will be to comply with the forecast.
“The window of opportunity closes quickly,” said Kristalina Georgieva, managing director. “The longer it takes to speed up the production and rollout of vaccines, the harder it will be to make those profits.”
The IMF has modeled a downside scenario in which the supply of vaccine bottlenecks and other logistical problems allow existing virus variants to be entrenched and new mutations to occur, leading to delays in achieving six-month herd immunity in advanced economies and nine months in emerging markets.
In such a scenario – with persistently high infection rates and deaths slowing down the normalization of mobility – global growth could be 1.5 percentage points less than in the baseline scenario in 2021 and a further 1 percentage point below the baseline in 2022.
According to Ben Emons, managing director of Medley Global’s global macro strategy, the rate of vaccinations over the coming months and their ability to resist new variants will determine their recovery. Advisors In New York.
“It will take most of the second quarter to gain visibility if global implementation really succeeds against the variant,” Emons said.
(Updates with Indian Virus Push details in fifth paragraph)