Vaccine breakthrough breathes life into a troubled world economy

Global stock markets and shares of banks and airlines got a shot in the arm as reports emerge that a Covid-19 vaccine jointly developed by Pfizer and BioNtech has shown better than expected results in a crucial trial phase. 

The development gave a much-needed boost to investor sentiment as the Dow Jones Industrial Average and S&P 500 - the major US indexes - rallied to set intraday records. 

As people woke up in Asia on Tuesday, they too got on the cheering bandwagon with investors rushing to buy stocks, which have lost value since the novel coronavirus pandemic became a world-wide health emergency earlier in the year. 

By the close of the trading session, Nikkei Stock Average, Japan’s key market index, surged to 25,000 points, breaking a 29-year record. Markets in South Korea, Australia and other countries also rose on expectations that a vaccine can set the global economic wheel into motion once again. 

United States-based Pfizer, and BioNTech, which was founded by a Turkish-German couple, say their mRNA technology-based vaccine has shown 90 percent effectiveness in Phase-3 trials. The World Health Organisation (WHO) says no vaccine is 100 percent effective. 

“These are hugely positive and encouraging interim results and are testament to the ingenuity and skill of the scientific community in advancing vaccine candidates against COVID-19,” Dr Richard Hatchett, CEO of CEPI, which funds development of vaccines, said in a statement. 

Pfizer and BioNTech’s vaccine is among 11 promising drugs. 

A sick economy 

Covid-19 has killed more than 1.2 million people, overburdened hospitals and led to millions of job losses or reduced pay and working hours.  

In the US, the world’s largest economy, around 3.8 million people are out of work. Many of the jobs might never come back as companies have permanently laid off workers to cut costs. 

Governments, mostly in rich countries, have allocated more than $10 trillion in stimulus spending to compensate out-of-work employees and businesses unable to pay their debts. Still, that hasn’t helped ease the gloom. 

The global economy can contract by 4.4 percent this year, according to projections of the International Monetary Fund (IMF) released in October before many European nations reintroduced lockdowns and curfews. 

The pandemic has forced people to hold back spending and postpone travel plans, dealing a blow to airlines and hotels, which employ millions of people around the world. 

The International Air Travel Association (IATA) estimates that airlines will lose more than $84 billion this year as passenger demand has plunged by 66 percent. The slump has pushed airlines to the brink - Thai Airways recently put 34 passenger jets for sale. 

Social distancing measures have rung the death knell for restaurants, gyms, cinemas and shopping malls, which have seen a drastic drop in the number of visitors. 

Debt-ridden countries such as Zambia and Pakistan, already struggling with the challenge of raising exports, have particularly been hit hard as demand for their goods such as copper and garments have dropped.

While the expectation that a vaccine is in the offing has cheered up investor mood, it will take time to produce hundreds of millions of doses which can equitably reach rich and poor alike. 

The US and the United Kingdom have already secured more than 140 million doses. 

A group of rich countries, representing 13 percent of the world’s population, have reserved around half of the vaccine supply already, according to Oxfam. 

The US, the UK, the European Union, Australia, Hong Kong and Macau, Japan, Switzerland and Israel have signed deals with manufacturers to get their hands on 51 percent of doses whenever production starts.

Pfizer and BioNTech have priced the vaccine at $19.5 a dose and refused to join pharmaceutical firms such as AstraZeneca which have announced to forego profits from the sale of the vaccine.