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Vaccines and stimulus pave the way for a big, uneven global recovery

Monday provided two major reasons for optimism about the global pandemic recovery.

Driving the news: Real-world data from Israel found that the Pfizer-BioNTech vaccine was at least 97% effective in preventing symptomatic COVID-19 cases, and President Biden signed a $1.9 trillion stimulus bill that the Organization for Economic Co-operation and Development (OECD) projects will add a full percentage point to global economic growth this year.


  • The dramatic rebound in the U.S. economy — thanks to the vaccination campaign and rescue package — should directly benefit top U.S. trading partners, particularly Canada and Mexico, per the OECD.
  • “This will not only boost the U.S. economy, but it will fuel global growth through increased demand in the U.S. and from the U.S. to the rest of the world,” said OECD chief economist Laurence Boone.
  • While Chinese growth helped power the recovery from the 2008 financial crisis, the U.S. should be at the center of the rebound this time.

That rosy economic outlook is inextricably linked to an expectation that the U.S. and eventually the world will be able to vaccinate their way out of the pandemic.

  • The new data from Israel — indicating that Pfizer's vaccine appears to be 94% effective against asymptomatic infection and 97% effective at preventing hospitalizations and deaths — is another beam of light at the end of the tunnel.
  • So is Monday's news that Novavax's still-to-be-approved vaccine is up to 96% effective.

The other side: A recovery based on vaccinations and stimulus spending risks leaving behind the countries that haven’t been able to deploy much of either.

  • While the OECD now projects the U.S. economy to be slightly larger by the end of this year than had been expected prior to the pandemic — thanks to the massive stimulus bill — the economies of India, Indonesia, South Africa and Mexico will be 6–8% smaller than anticipated.
  • Some developing economies are expected to take years to claw back the growth they lost during the pandemic. Investors could be tempted to move out of emerging-market economies and into the U.S., the WSJ notes.
  • Meanwhile, the World Bank projects that there will be 150 million more people living in extreme poverty by year's end as a result of the pandemic.

What they're saying: International Monetary Fund chief Kristalina Georgieva is warning of a "great divergence" between countries, due in large part to the vaccination gap.

  • Rather than catching up to advanced economies, the IMF anticipates that the gap in incomes between rich and poor countries will grow between 2020–2022.
  • She sees that looming divergence as a "major threat to global economic and social stability."
  • And if the Federal Reserve is forced to raise interest rates to tamp down inflation, emerging markets will be hit particularly hard, Harvard economist Kenneth Rogoff notes.

The bottom line: After a brutal year, we can now see the green shoots of a global recovery — but they're unevenly distributed.

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