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Vaccines for COVID-19 have already been invented: will they save the global economy

The emergence of several vaccines at once has encouraged countries exhausted by the coronavirus. Vaccinations promise a return to normal life in the near future after months of lockdowns, writes Air force... But will they save the global economy from the biggest crisis of the century?

Photo: Shutterstock

A large-scale crisis interrupted a multi-year increase in wealth in the world, set most countries back a few years ago and has already cost taxpayers $ 12 trillion. It will be necessary to spend more on anti-crisis measures, despite the fact that incomes are shrinking: the world will miss $ 28 trillion in five years, the International Monetary Fund calculated.

There is less and less money for life and development, and debts are growing - in 2020 they will increase by another 20 trillion dollars and will exceed the annual volume of the world economy by three and a half times.

As the cause of this crisis is the same - the virus, the news of the appearance of several working vaccines caused a surge of joy in the financial markets. Those who have money have made bets on the future growth of business and household income. Economists, officials and central bankers - those who are responsible for financial stability and provide anti-crisis assistance - reacted much more restrainedly.

The head of the US Central Bank, Jerome Powell, the most influential and cautious banker in the world, capable of bringing down world markets in one word, called the vaccine "good and long-awaited news", but made a reservation: it will have an impact on the economy in the medium term, and not in the near future.

His colleagues in Europe - the second largest world economy after the United States - are also in no hurry to order a banquet to mark the end of the crisis.

“The emergence of a vaccine changes the idea of ​​how the situation will develop towards the end of next year and in 2022, and not in the next six months,” said Irish economist Philip Lane, who sits on the Council of the European Central Bank.

The head of the IMF, Kristalina Georgieva, agrees with the bankers who print dollars and euros. In her message to the leaders of the GXNUMX countries, she pointed to the fall slowdown in the economy revived in the summer. The second wave of the pandemic is to blame.

"A medical solution to the problem is already visible, but the path to economic recovery is still difficult and fraught with disruptions," warns the head of the IMF.

Light at end of tunnel

It turns out that the vaccine will not save the world economy from the crisis until the mass vaccination begins? Not at all, say economists whose glass is half full.

“There is also good news, such as the announcement of the likely imminent approval of several vaccines. From this point of view, the light is already visible at the end of the tunnel, ”said one of the leaders of the European Central Bank, Fabio Panetta.

The American economist James Ballard, who heads one of the federal reserve banks in the United States, put it in the same words:

“Looks like a light dawned at the end of the tunnel. The way out of the crisis is visible, now it is a very realistic point of view on the situation ”.

They are encouraged by the fact that the vaccine has a beneficial effect on the economy long before it removes the root cause of the crisis - the pandemic. And that's why.

Business activity is stifled as businesses and people have lost confidence in the future (which makes them spend less) and the authorities are afraid of the uncontrolled spread of the virus (which forces them to impose a lockdown). The availability of a vaccine nullifies these two risks even before vaccination becomes widespread.

On the subject: 'Help is on the way': 20 million Americans will receive the COVID-19 vaccine by the end of the year

Vaccination gives people and business hope that there will be no new lockdown. They start to spend the saved during the quarantine and postponed for a rainy day, which increases consumption. And again they are investing in the future (expanding the business, buying real estate), which spurs investment.

Consumption and investment are the two main components of economic growth. They were the ones who suffered the most during this crisis. The other two - trade and production - have not decreased so much, and since the summer they have been recovering vigorously.

In general, the vaccine will allow the world to reduce losses from the current crisis by $ 9 trillion in the next five years, the IMF calculated.

But it will get worse first

However, on its way to light, the world economy will have to stumble once again in a dark tunnel this winter, warn those with half-empty glass. This stems from the second lockdown in Europe and the unbridled second wave of the pandemic in the United States.

America and the European Union account for more than a third of the world's wealth. They are the main source of effective demand and investment on the planet, and therefore the health of the entire world economy depends on their well-being. Without them, the countries that won the pandemic, primarily China, will not be able to win back their losses in full, although they will return to growth this year.

And here the news is not important. While the world was loudly celebrating vaccine after vaccine, economic statistics this week quietly and persistently confirmed the words of the head of the IMF that the recovery will be accompanied by relapses of the crisis.

In 19 European countries, where the common currency is the euro, there are signs of a new decline, showed a monthly analysis of public and business sentiment, published on Friday, November 27. In the US, the situation is similar - in November, growth expectations were replaced by pessimism. True, the Americans were interviewed even before the announcement of the triumph of pharmaceuticals.

Economists at Bloomberg Economics predict another recession for the barely recovered economy. They came to this conclusion based on an analysis of big data on business and consumer behavior - an innovation in economic statistics from the era of mobile internet and geotagging that gained popularity in this pandemic.

Their findings are supported by the business hardest hit by the coronavirus.

The second wave and the subsequent lockdown in Europe exacerbated the suffering of shops, restaurants, hotels and interrupted the recovery of entire industries like tourism and entertainment.

Airlines that have dramatically cut costs, flights and personnel continue to suffer colossal losses. And if in the summer the International Air Transport Association (IATA) predicted $ 100 billion in losses for them in the current and next years, then this week in the updated forecast the estimate is one and a half times sadder - more than $ 150 billion.

A fresh poll of the population and business in the eurozone dashed hopes for a quick revival of consumer demand - the main driving force behind the developed economies. In November, for the first time since spring, he indicated a decline.

The main problem is consumer uncertainty about the future. It has become aggravated, despite the vaccine, because gradually, but surely, the delayed consequence of any economic crisis - unemployment - materializes in Europe.

Let the economy of the Old World fell no less than the American one, but the surge in unemployment in Europe was much more modest than in the United States. It's all about doping.

The EU countries artificially supported employment and business in general with money. And as soon as the authorities begin to curtail these programs along with the lockdown, not everyone will survive without state support.

It is not for nothing that in the above-mentioned study of business and consumer expectations in the eurozone, the employment index is deteriorating for the second month in a row, indicating an impending surge in unemployment and, consequently, a reduction in consumption.

Another crisis year

All this confirms the fears of economists: the second wave of the coronavirus raised the second wave of the economic crisis.

But there is good news as well. The repeated shock promises to be much weaker than the primary, spring shock. Thanks to the fact that entire industries have learned to live in a pandemic.

First of all, this applies to industry. Factories are operating at full capacity, and countries in whose economies production plays an important role (primarily Germany) are recovering from the crisis faster than those who are focused on the service sector (like Spain or Greece, which are dependent on tourism).

The shock will not only be weaker, but also shorter: the number of infections in Europe is declining, and the lockdown has already been removed almost everywhere.

The epidemiological advice did not stop the Americans - the roads were traditionally tight before Thanksgiving; many went to visit their relatives.

And when the second wave of the coronary crisis subsides, the return to the previous rate of growth of wealth in the world will directly depend on whether the West has enough money to support the economy on artificial respiration until the end of the pandemic.

For example, the rich countries of the world supported the population and business so powerfully that, despite the economic decline by 10%, the income of the population did not decrease, but grew by more than 5%.

The speed of recovery from the crisis will depend on the willingness and ability of the authorities to continue this support - from taxpayers' funds and on debt.

There are small problems with this In America, a new trillion dollar bailout package was stuck in Congress at least until Joe Biden's inauguration in late January. And in Europe, the € 2 trillion anti-crisis budget has run into disputes with Poland and Hungary over the rule of law.

And even if the money is found, it will be possible to talk about a return to normal life and a way out of the crisis only when the coronavirus turns from the plague of the XNUMXst century into a common disease like the flu. And it is better if this happens before the problems of the population and business lead from an economic to a financial crisis, the European Central Bank warned.

On the subject: COVID-19 Three Vaccine Race: What You Need to Know About Each Drug

The situation in America is even more fragile than in Europe. In addition to political aggravation due to the elections, the United States is experiencing not a recession, but an increase in the number of infections. Epidemiologists predict another surge as Americans disobeyed their advice and traveled en masse across the country to visit their families on Thanksgiving Day.

"The virus is spreading at a high rate, and the next few months will be very difficult," said the head of the US central bank Jerome Powell. "We've always said that the economy will not fully recover until people start avoiding the crowds."

It will not be possible to quickly return to pre-crisis growth rates and start fighting off the $ 28 trillion that was not received during the illness.

“The full recovery of GDP to 2019 levels will not happen until the fall of 2022,” said Philip Lane of the ECB. - We do not think that everything will suddenly become again the way it was before COVID-19. Because the pandemic will have a long-term impact on consumer confidence, savings and employment. The vaccine won't help that. ”

“Even in the most optimistic scenario, mass vaccinations will take a long time,” agrees his colleague Fabio Panetta. “And it will take even more time for the population to believe that everything is behind.”

“In other words, we have another 'pandemic year' in 2021,” Panetta said.

Read also on ForumDaily:

When the world will open its borders to air travelers: expert forecast

Trump announced the start of vaccination against COVID-19 in the United States

Scientists from Ohio have created a vaccine against cancer: what is known about it

UNICEF calls children living during COVID-19 'lost generation'

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