Vaccination May Not Be a Panacea for Economic Growth

(26 May 2021) From the time that the COVID-19 pandemic hit the global economy in the first quarter of 2020, progress in vaccination and vaccine efficacy have been cited by international organizations and research institutions as a key factor for economic recovery.  

The first COVID-19 vaccination programs launched in December 2020, and by the end of March 2021 countries like Israel, the UK, and the US had already made considerable vaccination progress. An analysis of the latest available data on retail sales, industrial production, and vaccination progress for 30 Organization for Economic Cooperation and Development (OECD) member countries allows us to test the hypothesis about vaccinations' role in economic recovery.

• Volume indices of industrial production and retail sales for OECD countries show that consumer demand and industrial production had recovered to pre-pandemic levels by January 2021, long before vaccination could help any country reach herd immunity.
• A comparison of vaccination progress (measured as the total number of vaccinations per 100 population) at the end of March 2021 with growth of industrial production and retail sales in March 2021 compared with January -February 2020, looking at 30 OECD countries, provides little evidence that the pace of economic recovery depends on the pace of vaccinations. The economies of Israel, the UK, and the US, which outpace other countries in the vaccination race, are experiencing the same speed of recovery as many other countries with much more modest vaccination progress.

The pandemic is undoubtedly having a serious negative impact on some industries like international tourism and passenger aviation. Nevertheless, data suggests that the global economy had adapted to COVID-19 before vaccines could have noticeable positive health and economic impact.