Editorial | IMF forecast and vaccines
The International Monetary Fund’s (IMF) projection of a faster-than-expected recovery by the world economy from its COVID-19 slump should be good news for Jamaica, especially with the forecast for a strong resurgence by the United States, whose economy is estimated to grow by 6.4 per cent this year.
However, reaping full rewards from these developments, if they hold true, is not, in the current situation, a passive endeavour. Jamaica has to put itself in a position to grab the fruit. That, in this context, means finding a way to accelerate its vaccinations against coronavirus. In this regard, this week’s arrival of 75,000 doses of the AstraZeneca vaccine, acquired through the African Union’s Africa Medical Supplies Platform (AMSP), is welcome, but not sufficient to substantially move the needle. So, should the global bottlenecks to vaccine production and deliveries continue, and given the IMF’s less-than-stellar expectation of the Caribbean’s tourism-dependent economies, the Government may have to recalibrate its position on vaccine suppliers, becoming more catholic about it.
After last year’s estimated contraction of 3.3 per cent, the IMF projected in January that global output would rise by 5.5 per cent in 2021. However, in its latest World Economic Output released this week, the Fund revised that figure upwards by 0.5 percentage points, while adding 0.2 percentage points to its forecast for 2022. “We are now projecting a stronger recovery in 2021 and 2022 for the global economy compared to our previous forecast, with growth projected to be six per cent in 2021 and 4.4 per cent in 2022,” said Gita Gopinath, IMF’s economic counsellor and director of the research department.
These expectations are not without significant downside risks. The optimism, though, is fuelled by how relatively well the world has adapted to living with COVID-19 (which helped to moderate last year’s fallout) and strong stimulus spending by developed world economies, such as America’s recent US$1.9-trillion recovery programme. There is also the push by America’s new president, Joe Biden, for Congress to pass an infrastructure bill worth more than US$2 trillion over eight years.
SIGNIFICANT TRADE PARTNER
Then there are the COVID-19 vaccines, of which there has been significant roll-outs in rich countries, including the US, Jamaica’s major trading partner. Not only does it account for more than 40 per cent of Jamaica’s visible trade, the United States provides over 70 per cent of the island’s tourists. However, tourism, estimated to account for around 30 per cent of the island’s economy, all but collapsed as global travel came to a standstill as governments attempted to slow the spread of COVID-19.
By earlier this week, though, just under a fifth of Americans had been fully vaccinated (most COVID-19 vaccines require two doses) against the virus, while over 30 per cent had received at least a single dose. The Biden administration is attempting to accelerate vaccinations, thus facilitating a broader reopening of the US economy and releasing pent-up demand. Some of that demand will be for travel, Jamaica’s biggest offering to America’s market.
Jamaica’s projection for growth this year is between three and eight per cent, coming from last year’s more-than-10 per cent decline. Much of the growth impetus, we presume, is predicated on a significant rebound in tourism. But despite the relative success of the protocols Jamaica has put in place to protect visitors and industry workers, tourists, including Americans, will more likely travel to countries where they feel safe – those with high levels of vaccinations. We, too, want to protect ourselves against outsiders who may carry the virus.
Yet, Latin America and the Caribbean, as have many developing regions, have struggled to acquire vaccines – a fact noted by the IMF. The problem is likely to have contributed to the Fund’s expectation of a less-than-robust recovery this year by the Caribbean’s tourism-dependent economies. As a group, their outlook since October, the Fund reported, was “revised down by 1.5 percentage points to 2.4 per cent”. The Caribbean, more broadly, is expected to grow by 3.3 per cent in 2021 and by 11.1 per cent next year.
Although Jamaica has a broader economic base than most of its regional tourism-dependent partners, the industry is critical to the island. Its softness would have been a significant contributor to the IMF’s projection that Jamaica’s economy will grow only 1.5 per cent this year, a far cry from the base of four per cent estimated by the administration. Whatever the assumptions undergirding these analyses, the clear message is that Jamaica can ill afford to miss economic opportunities. The easiest of these to grab, if we are properly prepared, is what will be offered in tourism as the major economies expand and come out of lockdown.
BOOST VACCINE PROGRAMME
We, however, have to gin up the vaccination programme. Thus far, Jamaica has received 139,400 doses of vaccine – the 75,000 bought through the AMSP; the gift of 50,000 doses from India; and 14,400 via the COVAX initiative. That is sufficient to give five per cent of the population a single jab, or to fully vaccinate half that amount. It will require nearly 3.6 million doses of a two-dose vaccine to inoculate the two-thirds of the population that officials say is needed to reach herd immunity.
That amount is difficult to source. India, a major manufacturer of the AstraZeneca vaccine, had halted shipments because of a spike in its own COVID-19 cases. In Europe, the European Union (EU) and Britain are sparring over when, and who, should receive shipments of vaccines manufactured in the EU, which is seeking to ramp up inoculations. The United States, which led developed countries in cornering the market for vaccines, has largely maintained its inward focus on the distribution of the drugs.
In the meantime, geopolitics prevails with respect to vaccines developed in Russia and China. These products have received emergency-use authorisation in several countries. But the Russian jab, in particular, is being subject to an inexplicable slow review by European regulators, despite strong support for its safety and efficacy by respected Western scientific journals.
Jamaica must not allow itself to be held hostage to this geopolitical sparring. The health and livelihood of Jamaicans are at stake. If the Government is wary of a backlash on this front, maybe a signal that it is about to order Russia’s Sputnik V vaccine, or one of the Chinese products, might open the tap elsewhere.