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Bridging the vaccine divide will boost the global economy and save lives

Bridging the vaccine divide will boost the global economy and save lives
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The most urgent challenge facing the world today is bridging the COVID-19 vaccine divide. As of this writing, 45 percent of the residents of the world’s richest economies have received at least one dose of the vaccine.And in a handful of countries, the United States included, the share rises to more than half. As a result, COVID-19 cases and deaths are plummeting. But in the emerging market and developing world, which accounts for 86 percent of the world’s population, less than 20 percent of people have been even partially vaccinated. The pandemic continues to rage in countries such as Brazil and India, and it is popping up anew in places that had appeared to have the virus under control, such as Thailand and Malaysia.

The Biden administration’s decision last week to provide at least 80 million vaccine doses abroad by the end of June, as well as the proposal advanced by the International Monetary Fund (IMF) and other multilateral organizations to accelerate vaccinations and other pandemic control measures, speak to the weight placed on this issue by the world’s top policymakers. The need to support the global vaccination effort undoubtedly will also be addressed at the G7 meeting hosted by the United Kingdom this week.  

While the most important goal of this effort must be to save lives – in this case, measuring into the hundreds of thousands and possibly millions – bridging the vaccine divide is also critical to restoring a prosperous global economy. Suppressing the pandemic allows reductions in the social distancing and lockdown restrictions that have constrained economic activity.

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We have developed an econometric model to gauge how the evolution of the COVID-19 pandemic will affect economic growth around the world. Based on projections for pandemic deaths constructed by the Institute for Health Metrics and Evaluation (IHME), we find that progress toward controlling the pandemic should add 1.4 percentage points to global growth (four-quarter basis) in 2021. However, the economic effects of suppressing the pandemic will not be equally distributed: The boost to growth in the advanced economies (AEs) should amount to 2.3 percentage points compared with only 0.8 percentage point for the emerging market and developing economies (EMDEs). This disparity in part reflects that the pandemic hit the AEs harder last year, leading to a sharper economic bounce back this year. But the disparity also reflects the vaccine divide: AEs are now enjoying a much faster easing of the pandemic as a result of their faster progress in vaccinations. 

By how much would bridging the vaccine divide boost the world economy? In our research, we considered a best-case scenario in which COVID-19 cases and deaths around the world dropped precipitously from their May levels, similar to the decline recently enjoyed by the UK. This results in a million fewer pandemic deaths this year, with the lion’s share of the lives saved in the EMDEs. It also boosts global GDP growth in 2021 by about 0.4 percentage point relative to the baseline scenario described above. This may not sound like much, but it translates into about $470 billion in additional GDP, again most of which is in the EMDEs.

Accelerating vaccinations would not only add to the upside by curbing the pandemic and boosting output. It would also protect on the downside by reducing the likelihood of new pandemic surges that might otherwise erupt among unvaccinated populations. We therefore considered a downside scenario involving less social distancing and more COVID-19 deaths. Compared with the baseline scenario, global deaths rise by a million this year, mainly in the world’s poorest and least vaccinated countries, and world GDP falls by $470 billion. 

Our calculations reinforce a lesson that is becoming increasingly evident to economists and policymakers: Spending money to control the pandemic not only saves lives, but it always pays for itself through higher economic growth. The IMF proposal described above to accelerate vaccinations is estimated to cost $50 billion, a tiny fraction of the nearly $1 trillion difference in global GDP between the best-case and worse-case scenarios described above. 

It is not clear to what extent the proposal would achieve the best-case scenario while suppressing the worse-case scenario, but these numbers make it look very promising indeed.

Steven Kamin is a resident scholar at the American Enterprise Institute (AEI), where he studies international macroeconomic and financial issues. John Kearns is a research assistant at the American Enterprise Institute.