According to Bloomberg, expectations for a recovery in commodity prices and earnings growth are igniting bullish bets on emerging-market equities after more than a decade of underperformance that left them approaching a 20-year low against developed-nation stocks.
Goldman Sachs Group Inc., Bank of America Corp. and Lazard Asset Management expect a boost for developing equities as investors capitalize on cheap valuations once vaccine rollouts pick up, helping the global economy to recover from the pandemic. South Africa, Russia and Brazil are among markets set to benefit, even as China’s regulatory crackdown continues to weigh on Asian equities.
The views express in Bloomberg starkly contrast the research by Economist Intelligence Unit: Failing to quickly vaccinate will cost the world economy $2.3 trillion, The Economist Intelligence Unit said.
Poor countries would feel two-thirds of the pain, while North America and western Europe would go unscathed.
Patents, bottlenecks, vaccine hesitation, and shipping risks are all slowing mass inoculation, EIU said.
The price of quickly vaccinating the world? About $70 billion. The price of a slow vaccine rollout? Almost 33 times more.
Failure to quickly vaccinate the world’s population will cost the global economy $2.3 trillion through 2025, The Economist Intelligence Unit said in a Wednesday report. And like most aspects of the coronavirus pandemic, this sluggish vaccine drive will hurt poorer people the most.
Vaccine inequity is already pronounced. Major economies like the US, the EU, and China will probably reach widespread vaccination by the end of the year, EIU said, while developing countries are lagging far behind. Only 1% of the world’s poorer populations have received at least one dose of a COVID vaccine, and lower-income economies likely won’t reach mass vaccination until 2023 at the earliest.
Of course, slow vaccination in the most populous regions of the world may not crimp global economic activity visibly. However, it bears the risk of new variants emerging, which may supersede the Delta, having developed resistance to the new tech vaccines. How the Developed Economies would shield themselves, when they need to source raw materials and agricultural products from the “Unvaccinated” is a mystery.
The study comes as wealthy countries – whose companies developed the vaccines and bid for earliest access to them – face questions on whether they are meeting their pledges to help the globally less fortunate. The UK, for example, has only delivered about 10% of the 100 million doses it plans to give to developing countries by winter 2022. And as poorer countries grapple with the Delta wave, advanced economies are shifting their focus toward domestic booster shots.
Those wealthy countries also face the least damage from delayed vaccination. North America and Western Europe wouldn’t experience any drop in GDP from a slowed rollout, according to EIU.
Developing economies, however, would bear nearly two-thirds of the decline in GDP. The impact would be harshest in the Asia-Pacific region, where economic activity is expected to drop by 73% from 2022 to 2025. The Middle East and North African regions would face the second-largest decline, with growth sinking 10%.
The estimates likely understate how much delayed vaccination would hurt developing countries, EIU said.
Rich countries sharing their medical bounty with the poor are not very likely, as the former are shifting their priorities to domestic booster shots. The US has already rolled out its plan for third vaccinations. That pivot stands to “compound shortages of raw materials” and intensify bottlenecks, EIU said.
Patent laws have also blocked widespread distribution. The way patent law operates “is singularly ill-suited to the emergency conditions of a pandemic,” Brink Lindsey, vice president of the libertarian think tank Niskanen Center, said in a June Brookings report. The Biden administration waived patents for COVID vaccines in May, but that was more symbolic, as a real mass effort would require technology transfer and a ramp-up in production, Lindsey said.
Just getting vaccines to poorer countries wouldn’t be the end of the road, either. Developing economies also struggle with vaccine hesitancy. The issue is particularly difficult in Ukraine, Vietnam, and India, where populations exhibit “high levels of mistrust of vaccines,” EIU said.
However, estimates maintain it’s still worth paying up for expedited vaccination. Inoculating the world population against COVID would cost roughly $70 billion, according to a report from Oxfam, the Fight Inequality Alliance, the Institute for Policy Studies, and Patriotic Millionaires. That could be paid for with a one-time 99% tax on the financial gains billionaires enjoyed throughout the pandemic.
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