Slipping timetables for inoculation campaigns mean return to normal could get pushed back for many countries
5 min
Timetables for vaccinating enough people to effectively curb Covid-19 are slipping in many countries, raising fears that a large portion of the world will still be battling the pandemic and its economic effects well into 2022 or beyond.
While the U.S. and some other mostly small countries are making progress toward vaccinating most of their populations by late summer, health experts and economists are concluding that much of the planet—including parts of Europe, Asia and Latin America—face a longer slog.
Places from Germany to Mexico are running into serious problems sourcing sufficient vaccines. Other countries with low caseloads are less pressed to start vaccination campaigns and aren’t eager to reopen borders anytime soon.
At the current rates of vaccination, only about 10% of the world would be inoculated by the end of the year and 21% by the close of 2022, UBS says. Just 10 countries are on track to vaccinate more than one-third of their population this year.
The UBS data includes hard-hit middle-income countries such as South Africa where vaccination rates are expected to be painfully slow, though some countries it measured are expected to increase the pace of vaccinations soon.
But richer regions such as Europe are also facing delays. European officials in recent days watched as their goal of vaccinating 70% of the population by summer looked unachievable after doses ran out in some places, with just 2% of European Union residents covered so far.
The differing pace in vaccine rollouts world-wide raises the prospect of divergent economic fortunes for the world’s main economic blocs, at least in the near term. The U.S. economy could grow by 5.1% this year, according to International Monetary Fund forecasts, but recoveries of the eurozone and developing economies have become more uncertain given vaccination delays.
The U.S. and a few other countries could wind up enjoying many benefits of herd immunity but still be unable to fully mend their economies because they are waiting on other places to catch up. With borders shut globally, some businesses even in vaccinated countries would have to rely on domestic demand.
“So long as the pandemic terrorizes part of the world, normality will not be restored anywhere,” said Erik Nielsen, chief economist at UniCredit Bank.
Uneven vaccine distribution also means that Covid-19 could keep circulating for years, especially in nations such as Brazil and South Africa, where new infections are vastly outpacing inoculations. Both have become breeding grounds for more infectious new strains. In time, virologists expect the virus could mutate—in particular, modifying the shape of its outer protein spikes—an outcome they fear might ultimately render our current vaccines less effective.
Many scientists and policy makers predicted immunization programs would take a long time. Still, the unusually rapid development of vaccines raised hopes that 2021 would mark a return to normal for most of the world. Economists began upgrading their forecasts.
Global growth is still expected to be strong this year, and residents of many countries including the U.S. will undoubtedly see restaurants filling up and other signs of progress. The recovery is already so strong in some places that supplies of semiconductors are running short.
The U.S. and U.K. also experienced some early delays rolling out vaccine campaigns, only to see distribution pick up as snags were worked out.
Still, the outlook is growing considerably more uncertain elsewhere.
Borders are closing across much of Europe. New Zealand Prime Minister Jacinda Ardern said last week the country would continue to bar international visitors through most of 2021. A senior Australian health official recently made a similar prediction, in part because it isn’t clear whether Covid-19 vaccines prevent transmission of the virus or just stop people from getting severely ill.
Even the world’s fastest-vaccinating country—Israel—remains in a lockdown, with international flights banned indefinitely.
“This assumption that when Jan. 1 came we could just burn the old calendar and everything would be fine is proving to be a wildly optimistic view,” said Robert Carnell, an ING Group economist in Singapore.
The World Bank has forecast that remittances to the developing world—a vital lifeline—will fall 7.5% this year, after a 7% drop in 2020. Concert halls and schools might remain closed longer than expected.
Hotels in places such as Southeast Asia and the Pacific aren’t expecting business to fully rebound until the middle of next year. Many international students could be absent from university campuses until mid-2022.
“I’ve just been on the phone this morning to some lovely American clients,” said Mark Fraenkel, who owns Blue Dive Port Douglas, a scuba-diving business near Australia’s Great Barrier Reef. “I said, ‘Let’s not book you for 2021. We’ll just have to cancel.’ ”
Shippers, including DHL, are expecting air freight to get tighter for the first part of this year, not better, because fewer planes are flying to carry cargo. Discussions at the United Nations to normalize air traffic by creating a vaccine passport or even a common set of rules for tests are snagged in U.N. bureaucracy.
Intercontinental flight traffic won’t return to 2019 levels until 2023 at the earliest, the International Air Transport Association forecasts.
“We’re talking about years rather than months, and it’s partly related to the two-speed vaccination,” said Senior IATA Vice President Nick Careen. “We need governments to agree on a process; we can’t continue to operate like this.”
A central problem is that it is proving hard to scale up vaccine production quickly. Delayed deliveries can have domino effects on other buyers.
In Europe, where several top vaccines are made, production issues emerged last month with factories saying they couldn’t keep up. Frustrated, the EU introduced new measures on Friday that would let it block exports to wealthier countries, such as Canada, Japan or the U.S.
Slow production at a Belgian plant has meant Canadian officials recently received 70% fewer doses of a Pfizer vaccine. The same troubles have left Japan struggling to get doses it needs to vaccinate its population by the end of June, a crunch that may mean few fans for Tokyo’s Summer Olympics in July.
“I can’t tell you which month,” said Taro Kono, the minister in charge of Japan’s vaccine rollout, when asked when the general public could get immunized.
China also faces challenges. Although it has started inoculations using homegrown vaccines, without providing a firm timeline for reaching herd immunity, approvals and production arrangements have come more slowly than anticipated, according to Trivium China, a consultancy.
In one sign of the difficulties, the Beijing government’s talent office said that vaccine producer Sinovac is struggling to hire new staff.
“The main issue is production volume,” said Guo Wei, deputy secretary general of the health-care logistics association at the government-backed China Federation of Logistics and Purchasing, in an interview. He said that based on production estimates by China’s vaccine makers, the country wouldn’t be able to reach herd immunity this year.
Trivium estimates that a total of 850 million doses is the high end of what is possible for China this year, while administering at least 1.68 billion doses would be considered full inoculation. The Economist Intelligence Unit doesn’t rule out some major Chinese cities reaching herd immunity this year but estimates that the country as a whole likely won’t be able to reach it until late 2022.
Any production delays in China could affect other countries. Morocco planned to vaccinate 80% of its population in the coming months, in part using Chinese vaccines, but officials say they haven’t received all the supplies they need and have blamed manufacturers that can’t keep up.
Analysts doubt other countries can reach their stated targets. In Indonesia, officials want to vaccinate 65% of a population of 270 million in 15 months, which would more likely take three to four years, according to analysts at IMA Asia. The Philippines aims to vaccinate 70 million people this year.
“We doubt if half the 2021 goal can be reached,” IMA Asia said in a recent report.
Latin America’s two largest countries, Brazil and Mexico, have so far immunized just 0.8% and 0.5% of their populations, respectively. Argentina planned to receive five million doses of Russia’s Sputnik V vaccine in January, but only 800,000 have been delivered because of production delays in Russia.
Nigeria’s 206 million people have only one delivery scheduled, of 100,000 doses, expected next month.
Meanwhile, more people are putting plans on hold.
Mohammed Waqas, a 25-year-old in London, initially aimed to start a master’s program in teaching at an Australian university in February. Mr Waqas decided to defer enrollment until at least July because Australia’s border is closed to most international visitors. If the border isn’t open by July, he could defer until 2022.
“I’m one year behind where I would like to be,” Mr Waqas said.
—Chao Deng, Peter Landers and Samantha Pearson contributed to this article.
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Multinationals like Starbucks and Marriott are taking a hard look at their Chinese operations—and tempering their outlooks.
4 min
For years, global companies showcased their Chinese operations as a source of robust growth. A burgeoning middle class, a stream of people moving to cities, and the creation of new services to cater to them—along with the promise of the further opening of the world’s second-largest economy—drew companies eager to tap into the action.
Then Covid hit, isolating China from much of the world. Chinese leader Xi Jinping tightened control of the economy, and U.S.-China relations hit a nadir. After decades of rapid growth, China’s economy is stuck in a rut, with increasing concerns about what will drive the next phase of its growth.
Though Chinese officials have acknowledged the sputtering economy, they have been reluctant to take more than incremental steps to reverse the trend. Making matters worse, government crackdowns on internet companies and measures to burst the country’s property bubble left households and businesses scarred.
Now, multinational companies are taking a hard look at their Chinese operations and tempering their outlooks. Marriott International narrowed its global revenue per available room growth rate to 3% to 4%, citing continued weakness in China and expectations that demand could weaken further in the third quarter. Paris-based Kering , home to brands Gucci and Saint Laurent, posted a 22% decline in sales in the Asia-Pacific region, excluding Japan, in the first half amid weaker demand in Greater China, which includes Hong Kong and Macau.
Pricing pressure and deflation were common themes in quarterly results. Starbucks , which helped build a coffee culture in China over the past 25 years, described it as one of its most notable international challenges as it posted a 14% decline in sales from that business. As Chinese consumers reconsidered whether to spend money on Starbucks lattes, competitors such as Luckin Coffee increased pressure on the Seattle company. Starbucks executives said in their quarterly earnings call that “unprecedented store expansion” by rivals and a price war hurt profits and caused “significant disruptions” to the operating environment.
Executive anxiety extends beyond consumer companies. Elevator maker Otis Worldwide saw new-equipment orders in China fall by double digits in the second quarter, forcing it to cut its outlook for growth out of Asia. CEO Judy Marks told analysts on a quarterly earnings call that prices in China were down roughly 10% year over year, and she doesn’t see the pricing pressure abating. The company is turning to productivity improvements and cost cutting to blunt the hit.
Add in the uncertainty created by deteriorating U.S.-China relations, and many investors are steering clear. The iShares MSCI China exchange-traded fund has lost half its value since March 2021. Recovery attempts have been short-lived. undefined undefined And now some of those concerns are creeping into the U.S. market. “A decade ago China exposure [for a global company] was a way to add revenue growth to our portfolio,” says Margaret Vitrano, co-manager of large-cap growth strategies at ClearBridge Investments in New York. Today, she notes, “we now want to manage the risk of the China exposure.”
Vitrano expects improvement in 2025, but cautions it will be slow. Uncertainty over who will win the U.S. presidential election and the prospect of higher tariffs pose additional risks for global companies.
For now, China is inching along at roughly 5% economic growth—down from a peak of 14% in 2007 and an average of about 8% in the 10 years before the pandemic. Chinese consumers hit by job losses and continued declines in property values are rethinking spending habits. Businesses worried about policy uncertainty are reluctant to invest and hire.
The trouble goes beyond frugal consumers. Xi is changing the economy’s growth model, relying less on the infrastructure and real estate market that fueled earlier growth. That means investing aggressively in manufacturing and exports as China looks to become more self-reliant and guard against geopolitical tensions.
The shift is hurting western multinationals, with deflationary forces amid burgeoning production capacity. “We have seen the investment community mark down expectations for these companies because they will have to change tack with lower-cost products and services,” says Joseph Quinlan, head of market strategy for the chief investment office at Merrill and Bank of America Private Bank.
Another challenge for multinationals outside of China is stiffened competition as Chinese companies innovate and expand—often with the backing of the government. Local rivals are upping the ante across sectors by building on their knowledge of local consumer preferences and the ability to produce higher-quality products.
Some global multinationals are having a hard time keeping up with homegrown innovation. Auto makers including General Motors have seen sales tumble and struggled to turn profitable as Chinese car shoppers increasingly opt for electric vehicles from BYD or NIO that are similar in price to internal-combustion-engine cars from foreign auto makers.
“China’s electric-vehicle makers have by leaps and bounds surpassed the capabilities of foreign brands who have a tie to the profit pool of internal combustible engines that they don’t want to disrupt,” says Christine Phillpotts, a fund manager for Ariel Investments’ emerging markets strategies.
Chinese companies are often faster than global rivals to market with new products or tweaks. “The cycle can be half of what it is for a global multinational with subsidiaries that need to check with headquarters, do an analysis, and then refresh,” Phillpotts says.
For many companies and investors, next year remains a question mark. Ashland CEO Guillermo Novo said in an August call with analysts that the chemical company was seeing a “big change” in China, with activity slowing and competition on pricing becoming more aggressive. The company, he said, was still trying to grasp the repercussions as it has created uncertainty in its 2025 outlook.
Few companies are giving up. Executives at big global consumer and retail companies show no signs of reducing investment, with most still describing China as a long-term growth market, says Dana Telsey, CEO of Telsey Advisory Group.
Starbucks executives described the long-term opportunity as “significant,” with higher growth and margin opportunities in the future as China’s population continues to move from rural to suburban areas. But they also noted that their approach is evolving and they are in the early stages of exploring strategic partnerships.
Walmart sold its stake in August in Chinese e-commerce giant JD.com for $3.6 billion after an eight-year noncompete agreement expired. Analysts expect it to pump the money into its own Sam’s Club and Walmart China operation, which have benefited from the trend toward trading down in China.
“The story isn’t over for the global companies,” Phillpotts says. “It just means the effort and investment will be greater to compete.”
Corrections & Amplifications
Joseph Quinlan is head of market strategy for the chief investment office at Merrill and Bank of America Private Bank. An earlier version of this article incorrectly used his old title.
