Pfizer has just reported promising results for their COVID vaccine. Whether this is the definitive vaccine is yet to be known, but it does confirm our earlier understanding that the COVID vaccine will likely be the fastest developed one in history.
A vaccine will be crucial in allowing countries to return to pre-pandemic norms. During the first wave, the global economy suffered severe contractionary pressures (Table 1). India experienced a 29% QoQ contraction in economic growth in Q2, with the UK and Mexico also seeing significant declines. These three countries are also among the top five worst affected countries in terms of COVID-19 deaths.
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Summary
- Pfizer has just reported promising results for their COVID vaccine.
- A vaccine is likely to help economies whose sectors have been most affected by stay-at-home orders.
- Those set to gain most are Spain, Brazil, Mexico, Philippines, Thailand and Turkey.
Market Implications
- Short – to medium-term – Bullish BRL, PHP, MXN, TRY, THB
Pfizer has just reported promising results for their COVID vaccine. Whether this is the definitive vaccine is yet to be known, but it does confirm our earlier understanding that the COVID vaccine will likely be the fastest developed one in history.
A vaccine will be crucial in allowing countries to return to pre-pandemic norms. During the first wave, the global economy suffered severe contractionary pressures (Table 1). India experienced a 29% QoQ contraction in economic growth in Q2, with the UK and Mexico also seeing significant declines. These three countries are also among the top five worst affected countries in terms of COVID-19 deaths.
Mobility is widely considered a good high-frequency proxy for economic activity. The sharp declines in mobility around March reaffirm the large QoQ changes in growth (Chart 1). In recent months, we have once again seen a drop in the measure.
Crucially, tighter restrictions during second waves have been more targeted. As a result, economic activity is unlikely to fall at the same rate as in Q2. However, countries that have a higher share of GDP in sectors most affected by stay-at-home orders will undoubtedly still suffer.
Three key industries that continue to be hit hard by the pandemic are; accommodation & food services, entertainment & recreation, and retail trade. Spain and Brazil, two countries that have registered a high number of cases, have large GDP shares in these sectors at 27% and 23%, respectively (Chart 2).
The tourism industry has also been significantly affected by a drop in mobility. From Chart 3, we can see that the Philippines, Thailand and New Zealand will all be hoping that vaccinations can restore confidence among holiday makers.
Sam van de Schootbrugge is a macro research economist taking a one year industrial break from his Ph.D. in Economics. He has 2 years of experience working in government and has an MPhil degree in Economic Research from the University of Cambridge. His research expertise are in international finance, macroeconomics and fiscal policy.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)