R&I – FS
As the global COVID-19 pandemic carries on with its deadly toll, most economic and business forecasts assume there will be an effective vaccine against the virus, likely by the middle of next year.
But what if there isn’t?
If those forecasts are wrong, everything from economic growth to stock and bond prices could be affected, economists and market strategists say. Industries which are already struggling could be put into a permanent tailspin. Stock prices, especially in the U.S., would be set for a tumble. Local government tax revenues could also take a hit, as vacancies rise and the value of commercial real estate falls.
A study at the U.K.’s Imperial College of London released this week found that COVID antibodies in people who’ve been infected don’t last very long, suggesting that long-lasting herd immunity — even with a vaccine — might not be achievable.
“It will be a disaster if it’s the worst-case scenario and there’s no vaccine,” said Tony Frost, an economist and associate professor at Western University’s Ivey School of Business.
“The economy will be like a World War Two bomber returning to base. ‘What happened, and my god, look at all these holes,” said Frost.
Among the holes in the economy if there isn’t a vaccine? The airline industry, restaurants, the corporate office space market, and hotels.
The flow of government support that’s been propping up suffering industries will eventually need to be shut down if there’s no vaccine found, said Pedro Antunes, chief economist at the Conference Board of Canada, an economic think tank.
“Markets seem to be assuming that there’s going to be a vaccine. If we don’t have a vaccine, we’re going to have to make some tough decisions,” said Antunes, adding that government debt relative to the size of the economy has grown by roughly 10 per cent in most major economies since the start of the pandemic. “We really can’t afford to keep the floodgates open on these supports.”
Bill