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What difference will the pace of vaccination make for the economy?

1/7/2021

The introduction of vaccines will enable the global economy to make the shift from a stuttering recovery, shaped by a series of lockdowns and their relaxations, towards a steadier growth trend. A key factor will be the gradual reduction in uncertainty, which will encourage households to spend and businesses to invest. The quicker we reach collective immunity, the stronger this economic momentum will be.

TRANSCRIPT // What difference will the pace of vaccination make for the economy? : January 2021

FRANÇOIS DOUX

How fast will the global economy grow in 2021? Will the arrival of vaccines change the picture? William De Vijlder, hello.

WILLIAM DE VIJLDER

Hello François.

FRANÇOIS DOUX

First question, without a vaccine what would the chart look like?

WILLIAM DE VIJLDER

I’ll try to sketch it out on the screen. So you see there are waves of lockdown and relaxation of restrictions. The only good news from this chart is that the fall-off in economic activity in the second, or subsequent lockdowns is less pronounced. The main underlying trend in economic activity and demand components of GDP is nevertheless downwards, and the negative effects would pile up: corporate indebtedness, collapsing investment, rising unemployment.

FRANÇOIS DOUX

So this is the ‘stop and go’ that we saw in 2020. But in 2021, vaccination campaigns will begin. How do you see this playing out?

WILLIAM DE VIJLDER

We are looking at a more attractive, more positive picture. Granted, there will still be waves of infection, but we can see that the drop in activity becomes smaller and, most importantly, that the underlying trend is now upwards. This is in part due to a reduction in uncertainty. This reduction in uncertainty is a very important factor which will encourage some households to make major purchases, or some companies to start to invest a little bit.

WILLIAM DE VIJLDER

The other important point is that once we have reached a point of collective immunity, we can see a rising slope, which shows that we will be in a period of more sustained growth.

FRANÇOIS DOUX

And there is a third and final scenario. If vaccination happens more quickly, this will boost confidence. So then we would be in an even more optimistic scenario.

WILLIAM DE VIJLDER

Exactly. You will see that as we make the change, the number of waves falls and, most importantly, the slope is steeper. This clearly shows that the quicker we reach this crucial stage of immunity, the greater will be the relief for businesses, for consumers and so on. This is what will truly boost confidence and free up purchasing power.

FRANÇOIS DOUX

Something to watch closely, therefore, the health trend will remain important for confidence and global growth. Thank you, William De Vijlder.

 

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