There is still a possibility that an effective deployment of the vaccine in Canada and elsewhere will actually lead to signs of recovery well before the end of this year. But there are voices suggesting the pandemic could contain more bad news. The first day of trading in the market of the year certainly did not bode well.
“Shares hit record highs early in the session as investors focused on rolling out COVID-19 vaccines,” Reuters reported. “But investors were quickly cautious on the path of the virus, which continues to spread amid the discovery of a new variant. ”
It is never a good idea to put too many stocks in a single trading day or instant analysis of sudden market movements, but Monday’s drop – which saw the tech-intensive Nasdaq market plunge nearly 3% – added to a sense of unease.
Trigger tighter restrictions
“As the new COVID-19 strain triggers tighter restrictions on economic activity and further limits the movement of people, it has become increasingly clear that the road to vaccine-induced immunity will now involve more potholes, ”Mohamed El-Erian, a well-known American adviser to financial companies who is now president of Queen’s College, Cambridge, wrote in Tuesday Financial Times.
El-Erian feared that the struggle to recover from the economic impact of the pandemic could lead to ill-advised efforts by countries towards “further militarization of trade tariffs” and a destabilizing polarization of politics and revenues.
Virologists warn not only of a new strain, but a series of continuing mutations as the disease spreads around the world, constantly evolving due to accidental changes in its genetic makeup. Then, as we have already seen, the more virulent versions surpass their viral cousins to go around the world.
With luck, the faster spreading mutations won’t be worse – and theoretically could be milder. But some scientists in the UK have warned that current vaccines may not be as effective on a new variant in South Africa.
The most virulent European version has already appeared in the United States and Canada. As of this writing, the one found in South Africa has yet to be spotted here, but experience with previous transmission waves implies that its arrival is inevitable.
Meanwhile, the idea that countries and regions can fight the virus while keeping an economy intact faces conflicting evidence.
Case and death rates in areas that have remained widely open, places like Britain and the United States have faced increasing public pressure to take stronger action, even as the economy s ‘weakens. Places that imposed severe lockdowns earlier in the battle against the pandemic, such as Australia and China, have enjoyed relative economic success.
World Bank worries about debt and education breakdown
China’s economic data is often disputed, but the World Bank suggests the country’s growth will rebound to around 8% this year.
In its new report on the global economic outlook for 2021, the World Bank fears a lingering impact of the virus – what it warned could be a ‘lost decade’, especially for countries that have failed to bring the virus under control. pandemic early.
“Many countries are expected to lose a decade or more of per capita income gains,” the World Bank report says. “Downside risks include the possibility of another resurgence of the virus, more severe effects on potential output from the pandemic and financial strains. ”
In addition to the immediate damage to the economy caused by trade disruptions, domestic business activity and job losses, the World Bank fears that factors such as a huge build-up of public and private debt and a breakdown in the education lead to a prolonged deterioration of the economy. perspectives.
In parts of Canada and the UK, calls for tougher measures – including tighter limits on travel meant to combat the holiday-induced spread and increasing pressure on hospitals – mean that hopes plans to see the fall rebound continue through 2021 seem less certain.
While it may be skewed by the holidays, employment data for the United States and Canada is due Friday and will offer the most recent update possible on whether the slow but steady rise in the Canadian economy has come to a standstill.
Gross domestic product figures released two weeks ago showed growth has continued to accelerate since April’s big drop. If this continues, it will not be strictly a V-shaped recovery, but maybe a V written by a four year old who stretches a little too far to the right.
Maybe it has changed. The GDP data is from October, when everyone was much more bullish, when Statistics Canada collected the December employment data which we will see on Friday just a few weeks ago.
These jobs numbers may offer a first clue if the right bar of the V has moved lower, making it something closer to a W – the potential indicator of a double-dip recession.
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