- Tuesday, May 07, 2024
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The slow rollout of the COVID-19 vaccine in Europe is weighing on economic output and impacting trade. The European Union (E.U.) has been plagued with issues since it approved a coronavirus vaccine in December. The rush to begin an immunization campaign has not been successful. The E.U. has had an ongoing dispute with AstraZeneca as the company has experienced production shortfalls. The E.U. is India’s largest trading partner, and the lack of return to normalcy will eventually impact bilateral trade. The slow uptick in European growth has weighed on the EUR/INR currency pair, making Indian exports more expensive.
The E.U. Started Behind the Eightball
When the European Union approved its first vaccine in December, the bloc was already weeks behind nations like the United States and Britain. It then shifted its attention to AstraZeneca, but tensions were also raised by an escalating dispute over the drugmaker’s announcement that it would slash its vaccine deliveries by 60% because of production shortfalls. Despite its negotiating power, The E.U. bloc found itself behind the U.S. and Britain and other countries like Israel, Canada, and the United Arab Emirates.
With the pain of supply shortages being felt across Europe, some countries like Spain became the first E.U. country to suspend immunizations for lack of doses partly. The government announced that it would stop Madrid’s vaccination program for two weeks and warned that Catalonia might follow suit.
Some critics have blamed the European Commission for the mess. The commission struck deals on behalf of the member states to secure 2.3 billion vaccine doses from several companies. AstraZeneca and some European opposition politicians say the delay put the bloc at the back-of-the-line for deliveries.
India’s Rollout Started on a Good Note
The rollout effort was helped by an attempt from two locally-made vaccines and India’s prior experience with large-scale immunization campaigns. The Indian government granted emergency approval to two vaccines, a locally manufactured version of the Oxford-AstraZeneca vaccine and a vaccine called Covaxin developed by Bharat Biotech. The goal was to target 270 million people over 50 and those below 50 who have co-morbidities.
Only the Oxford-AstraZeneca vaccine has completed a Phase 3 clinical trial for safety and efficacy. Bharat Biotech initially had finished earlier-stage trials on its vaccine but has provided no data on whether it works. Vaccinations began at 3,000 sites across the country. More than 191,000 people were vaccinated on the first day.
E.U. Growth has Stagnated While Trade is Important for India
European Union Q4 growth was down 3.5% year over year, as the vaccine’s rollout eroded sentiment. The lack of growth in the E.U. can have an impact on growth in India. The EU is India’s largest trading partner, accounting for €80 billion worth of trade in goods in 2019 or 11.1% of total Indian business. The E.U. is the second-largest destination for Indian exports, more than 14% of the total, following just the United States. India is the E.U.’s 10th largest trading partner, accounting for 1.9% of E.U. total trade in goods in 2019. During this period, there was a downward movement in the forex market for the EUR/INR currency pair.
The Vaccine is the Key to Growth
The pandemic has put most of the world in a position where “back to normal” can be reached if a successful vaccine rollout can occur. The goal for any nation is to achieve herd immunity. This situation creates and indirectly protects an infectious disease that happens when a population is immune either through vaccination or immunity developed through the previous infection. The World Health Organization (WHO) says that the percentage of people who need to be immune to achieve herd immunity varies with each disease. For example, herd immunity against measles requires about 95% of a population to be vaccinated. For polio, the threshold is about 80%. Nobody knows how much of a population will be needed to generate herd immunity for COVID-19. The world could be lucky and it will only take 80% like polio. In large countries like India, that would mean that more than 900-million people would be needed to get vaccinated or have had the virus and build up enough immunity from a prior infection.
The Bottom Line
The rollout of the COVID-19 vaccine has been slow in Europe, leading to negative sentiment and slow E.U. growth. During this period, the INR has gained traction against the Euro. The smooth rollout of the vaccine is the key to future growth and positive sentiment. The E.U. is India’s largest trading partner, and the spread of the pandemic has likely harmed trade with India and E.U. growth prospects. Looking forward, both India and the E.U. will need to develop herd immunity to escape the virus’s grasp and return to normal economic conditions.
