While recent news about the high effectiveness of two coronavirus vaccines is a promising sign in the effort to combat the pandemic, a vaccine for Covid-19 will not be widely distributed before mid-2021, Moodys Investors Service said. "However, these developments do not change the assumption underpinning our economic forecasts that widespread, global availability of the vaccine to the general public is only likely by around mid-2021," Moody's said in a report.
"Our baseline economic forecasts balance the downside risks of increasing infections and new lockdowns in the next two months, against the potential for widespread vaccinations over the next 12 months. If lockdowns are more severe than we expect, the negative effect on GDP could be offset if a coronavirus vaccine is available quicker and uptake is wider than we had expected," it added.
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Although successful Phase 3 trials of vaccines are a big step, there are numerous hurdles ahead, including satisfying approval requirements by regulators in individual countries, production of the billions of doses required for mass vaccination, ensuring proper storage and building distribution networks.
Distribution will likely occur in phases once regulators approve a vaccine, with health officials prioritizing access for healthcare workers and those in other high-risk professions, as well as for people who are most vulnerable to COVID-19, such as older people and individuals in care homes.
Moody's said two important variables in overall success of vaccines in curbing the pandemic will be the public's willingness to get vaccinated and what percentage of the population will need to be vaccinated in order for the spread of the virus to be brought under control. Vaccine availability likely will vary across countries, with cost and access major hurdles in particular for less-developed economies.
Many advanced and a handful of middle-income emerging market countries have already secured contracts for hundreds of millions of doses of the vaccines. Residents of these countries will be among the first to get the vaccinations, with their economies benefiting from the associated easing of the public health crisis. The earlier the health crisis in a country subsides, the stronger the country's economic recovery will be, it added.
The report said mass vaccination that significantly reduces individual and public health concerns would lift sentiment and present a significant upside to global growth.
As long as the coronavirus remains a health risk, social distancing restrictions and the reluctance of consumers to engage in high contact social and economic activity will mar the recovery of services sectors. As vaccines become broadly available, health fears and concerns about an uncertain economic and financial outlook should recede, allowing for a quicker resumption of activity in high contact sectors such as hotels, restaurants, theaters, mass transit, airlines and travel and tourism.
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Moody's said the pandemic has already inflicted enormous damage on the hardest-hit sectors and will continue to undermine their financial condition and prospects, with repeated virus outbreaks and lockdown measures suppressing demand. The risk of business failure increases exponentially the longer the pandemic prevents a return to some semblance of normal activity.
A vaccine will help accelerate the recovery. But for many of these businesses, survival will remain challenging until the virus is no longer viewed as a significant public health threat. It is difficult to know how many businesses will survive several more months of below-normal revenue, it added.
Small and midsized businesses across advanced and emerging market countries are at risk and more of them will undoubtedly close on account of the prolonged cash flow shock. And those that do survive will have the long and arduous task of rebuilding their balance sheets while also, in many cases, facing significant changes in consumer behavior and demand patterns. "Therefore, even if economic activity returns to healthy levels once a vaccine is widely available, the detrimental economic impact and transformed operating environment will be felt for years to come", Moody's said.