Will vaccines end our economic slump?
In the past week alone, we heard three good pieces of news about the success of Covid-19 vaccine developments from Pfizer, Moderna and Russia. All of them claim to have an above 90% efficacy rate. I was rather sceptical about Pfizer's vaccine for actual distribution for two reasons. First, the vaccine is required to be stored at -75C and lasts only five days in the refrigerator. Clearly, this vaccine is not appropriate for use outside the United States. Therefore, I am not surprised to learn that the CEO of the company unloaded his company's shares after the news was announced.
The Russian vaccine is more media hype than anything tangible. However, Moderna's vaccine seems to be promising as it can be stored in a regular refrigerator, although one report says that it required a refrigeration temperature of -20C, and can be kept for 30 days before losing its effectiveness. These two properties are essential for distant distribution, particularly outside the US.
The production and distribution of the vaccine is as, if not more, important than the development of the vaccine itself. Just imagine a situation where we have to fly vaccines from Pfizer's lab in La Jolla, California in a specially designed refrigerator to Bangkok and onward to other provinces in Thailand. You need to deliver the vaccines amid complex transportation routes plus you must perform the vaccination within five days before the vaccines lose its effectiveness. If this is not possible in a modern country like Thailand, Covid-19 vaccines will only be a distant dream for countries like Cambodia, Myanmar and more. Therefore, it will take a long, long time before the entire world population gets vaccinated.
A long, long time is the phrase here. According to Moderna's press release, the vaccine will be available to priority groups, like healthcare workers, in the latter part of December this year and will be available to the general American public at the end of April 2021. Mass vaccination is expected to be completed by July. I interpret this statement as meaning that the rest of the world will not see Moderna's vaccine until the second half of next year. Of course, there are many vaccine developers around the world. Around 10 of them are under Phase III clinical trials, including AstraZeneca's, from which the Thai government has just booked 26 million doses. The success of these potential vaccines and their release dates have not yet been announced.
Before I move on to economic issues, I want to say a few things about the Covid-19 vaccines. First, they all are in the interim test stages. More data needs to be collected. Moderna intentionally uses the term "Early Data" in its press release. Theoretically, the test will be accurate when it has accrued successes in 150 to 165 cases of Covid-19. The Moderna test is based on 95 cases so far, while the Pfizer test is based on 64 cases. I have heard that the Russian test has is based on only 20 cases. More time is definitely needed.
The Moderna study reveals a very interesting fact. Out of 15,000 test subjects who received placebo (fake) vaccines, 90 of them developed Covid-19. Therefore, even without the vaccine, only 0.6% got sick while 99.4% remained asymptomatic. The question is why do we need a vaccine with 94.5% effectiveness when protecting oneself with social distancing and facemasks has proven to be 99.4% effective? Surely, this is not a question the drug company wants us to ask.
Second, nobody, even Moderna, knows the duration of protective immunity. Only time will tell. Yearly regular flu shots have an average protective immunity of six months. If that is also the case with Covid-19 vaccines, one will need two shots per year which will double the stress on supply adequacy and distribution. By the way, the 26 million doses of AstraZeneca vaccine cover 13 million Thais, with two shots per person.
The third observation is most disturbing. There are three identified strains of coronavirus. Type A is the "original" virus commonly found in China, American, and Australia. Type B is a mutation of Type A found outside China. Type C is a "daughter" of Type B found in Singapore and Europe. Do I need different vaccinations for different regions of the world? What happens if the virus mutates again?
Are you wondering why an economist has information about medical technology and Covid-19 vaccine development? It just happens that my adopted son holds a PhD in Parasitology from the University of Copenhagen. I have had many lengthy discussions with him on the subject which has provided me with ample knowledge to understand what has been going on. I need to know all this not just out of curiosity, but to determine the effects on the economy.
Now to my area of expertise -- economics. The first assumption is it will be at least a year before Covid-19 vaccinations, regardless from which developer, provide adequate protection to the general public at a level where all economic activities can return to the pre-Covid era. In Thailand, the 26 million booked doses can only protect 13 million Thais or 18.6% of the total population. That is not enough to openly welcome foreign tourists and visitors. Therefore, the economic environment of 2021 is likely to be no better than 2020, and Thailand cannot expect 40 million foreign tourists like the pre-Covid era.
The Bank of Thailand expects 9 million foreign tourists next year. That level of tourists would propel 2021 GDP to grow at a 3.6% rate. One can see that a mass return of tourists is most unlikely in 2021. Unfortunately, the tourism sector contributes 12% of GDP and employs 4.45 million people. If there are no or low levels of foreign tourists next year, a minimum of three million people will be out of a job -- a massive blow to the economy. This means three million families will be struggling for survival.
Foreign income will not be the only problem for the Thai economy. Domestic spending will suffer severely from a lack of credit expansion. It is already happening and will continue well into next year and beyond. Without banks generously extending consumer loans, consumption will not return to the pre-Covid era. This a complicated issue to explain. I will need a separate article on this. In conclusion, Covid-19 vaccines will not end the economic slump in Thailand.
Chartchai Parasuk, PhD, is a freelance economist.