A new report by Steven B. Kamin and John Kearns of the American Enterprise Institute examines what the coming global economic recovery from COVID-19 will look like and where the gains from vaccination and lockdown easing will be distributed.
To do so, they take country-specific projections of pandemic deaths as well as corresponding projections of the stringency of pandemic lockdown measures, and they plug these numbers into an empirical multi-country regression model which relates GDP to COVID-19 deaths and lockdown regulations.
They find that progress toward reducing pandemic deaths and lockdown restrictions should add 1.6 percentage points to global growth (four-quarter basis) in 2021.
However, just as the pains of the pandemic have not been distributed evenly, neither will this growth. The authors write:
“The boost to growth in the advanced economies (AEs) should amount to 2.3 percentage points compared with only 0.9 percentage point for the emerging market and developing economies (EMDEs). This disparity reflects both that the pandemic hit the AEs harder last year, leading to a sharper economic bounceback this year, but also that the AEs are now enjoying a much faster easing of the pandemic as a result of their faster progress in vaccinations.”
There are better and worse scenarios for these EMDEs though, they argue. The better scenario assumes rapid vaccination rates and fewer resultant deaths. Compared to this, the worse scenario of slow vaccination rates entails roughly 1.9 million additional deaths and $668 billion in lower global GDP in 2021, with the world’s poor disproportionately bearing the brunt of this burden.
Kamin and Kearns conclude then that the International Monetary Fund’s $50 billion plan to accelerate vaccine production and distribution, with 60 percent of gains going to developing countries, will be a cost-effective means of both saving lives and promoting global economic recovery.
