A new study commissioned by the ICC Research Foundation has found that the global economy stands to lose as much as $9.2 trillion if governments fail to ensure developing economy access to COVID-19 vaccines, as much as half of which would fall on advanced economies.
The study clearly demonstrates the economic case to invest in the Access to COVID-19 Tools (ACT) Accelerator, the global collaboration to accelerate the development, production, and equitable access to COVID-19 tests, treatments, and vaccines.
While other analyses have highlighted the economic costs of vaccine nationalism, this new study is the first to incorporate both supply and demand shocks, domestic and foreign, at the sector level, for an open economy operating within global supply chains. The integrated analysis shows the full possible ramifications of vaccine nationalism, which is significantly higher than previous best estimates. The paper demonstrates the economic costs of suboptimal vaccine distribution to the international trading system at the global scale, showing that even if a particular country has access to the vaccine, it “experiences a sluggish recovery with a drag on its GDP” if its trading partners do not have such access.
Strikingly, a US$ 27.2 billion investment on the part of advanced economies – the current funding shortfall to fully capitalize the ACT Accelerator and its vaccine pillar COVAX – is capable of generating returns as high as 166x the investment.
The study also shows that those economies and sectors with a high degree of international exposure will bear the brunt of economic losses.
Welcoming this latest contribution on the economic impacts of a fully funded ACT Accelerator, Dr Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization (WHO), said:
“I believe the world faces a catastrophic moral failure in equal access to the tools to combat the pandemic. This research shows a potentially catastrophic economic failure. The progress made by the ACT Accelerator shows solidarity in beating this virus.
The longer we wait to provide vaccines, tests, and treatments to all countries, the faster the virus will take hold, the potential for more variants will emerge, the greater the chance today’s vaccines could become ineffective, and the harder it will be for all countries to recover.
Truly, no-one is safe until everyone is safe.”
One of the study authors, Ṣebnem Kalemli-Özcan – Neil Moskowitz Endowed Professor of Economics and Finance at the University of Maryland, College Park – said:
“No economy can fully recover until we have global equitable access to vaccines, therapeutics and diagnostics. The path we are on leads to less growth, more deaths, and a longer economic recovery.”
ICC Secretary General John WH Denton AO said:
“The new year presents us with an opportunity to correct course – to consign vaccine nationalism to the past and ensure multilateral efforts have the funding and support necessary to succeed.
As this study shows, ensuring equitable access to COVID-19 tests, treatments and vaccines is not only the right thing to do – to do otherwise is economically irresponsible. International business needs a fully funded ACT Accelerator.”
ICC Research Foundation Chair Terry McGraw said:
“This report proves the economic interdependencies of developed and developing countries and the essential requirement that we work together to multilaterally coordinate the distribution of vaccines, tests and therapeutics. We in the business community pledge to do our part to facilitate this ethical, humanitarian and economic solution to the pandemic as quickly as possible.”
- The economic costs borne by wealthy countries in the absence of multilateral coordination guaranteeing vaccine access and distribution range between US$ 203 billion and US$ 5 trillion, depending on the strength of trade and international production network relations. The ACT Accelerator is fully costed at US$ 38 billion.
- These costs are an order of magnitude larger than those estimated by earlier studies, which calculated the costs of inaction at between US$ 119 – US$ 153 billion in 2021 and up to US$ 466 billion by 2025 (Duke Health, Eurasia Group, RAND). This is because the new study is calibrated to a large set of countries and sectors, fully incorporating international trade and production network.
- The study shows a clear positive relationship between the economic cost of uneven vaccine distribution and trade linkages – the more open an economy is, the stronger the economic incentive it should have in ensuring trading partners have access to vaccines.
- If advanced economies continue to prioritize vaccination of their susceptible populations without ensuring equitable vaccination for developing economies, the total cost to the world varies between US$ 1.5–9.2 trillion.
- The expected economic cost to the United States is US$ 45 billion to US$ 1.38 trillion. The expected economic cost to the United Kingdom is US$ 8.5–146 billion. The expected cost to Germany is US$ 14–248 billion.
- Key advanced economies most impacted include many European countries (including Belgium, France, Germany, the Netherlands) Norway, Switzerland, the United Kingdom and the US, who might lose up to 3.9 percent of their GDPs relative to a world where all countries are vaccinated.