The Straits Times says

Slow recovery, even with vaccines

The ongoing and planned vaccine roll-out around the world not only marks a health breakthrough, but will also help boost economic activity and speed up a return to greater normalcy in many aspects of day-to-day life. However, expectations need to be tempered because the positive effects are likely to materialise only gradually. Moreover, there will also be after-effects from the year-long pandemic that has devastated several economies, and which could uncover new downside risks. The global vaccine roll-out will happen at varying speeds in different countries, many of which will face formidable logistical challenges in securing, distributing and deploying vaccines. The take-up rate for vaccinations - which are voluntary - will also be uncertain, including in Singapore. Thus, it will be several months before large enough sections of the population are vaccinated to enable a return to more normal life.

Meanwhile, many economies - which are still reeling from rising numbers of infections, especially among developed countries - remain weak. The International Monetary Fund (IMF) projects that the global economy will contract by 4.4 per cent this year, and Asian economies by 1.7 per cent. And although a brisk recovery is provisionally forecast for next year, several institutions have warned of lingering problems from the pandemic. The IMF noted that despite the recovery in gross domestic product, unemployment rates are expected to remain elevated across developed and developing economies. The World Bank warned that the pandemic will push some 150 million more people into poverty by next year, and the International Finance Corporation flagged the risk of a corporate debt and banking crisis in Asia after the lifting of loan moratoriums and bank forbearance.

Also important is the fact that progress in pandemic control and vaccination in one or a few countries will not be sufficient in restoring normalcy, especially in sectors that depend on the cross-border movement of people. For example, Singapore's transition to phase three of its reopening and its moves to expand travel bubbles for business visitors will be welcome news, especially for the beleaguered aviation, tourism and hospitality sectors. But the effectiveness of the measures depends on the success of other countries controlling their own outbreaks and reopening their economies. Reopenings also entail risks.

Many countries which relaxed social restrictions earlier this year have faced second and third waves of Covid-19. Travel bubbles can also be subject to risk, as illustrated by the postponement of the Hong Kong-Singapore travel bubble last month because of a sudden spike in cases in Hong Kong. Given all these uncertainties, the arrival of vaccines, while a welcome development, is not likely to be the magic bullet that restores normalcy, at least well into next year.

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