2020 will be remembered as the year of the pandemic, while 2021 promises to be the year of the vaccine. The distribution of the vaccine throughout the year should finally allow the depressed services sector of the global economy to bounce back strongly and for countries that have been held hostage by the pandemic to return to normal. But how exactly will a vaccine be distributed globally to 7.8 billion people?

Thankfully, we have now taken the first momentous step: developing a safe and effective vaccine for COVID-19. So far, two vaccines have been approved by national regulatory agencies (Pfizer/BioNTech and Sinopharm-Beijing) and five others are in early/limited use (two Russian and three Chinese vaccines). In addition, 15 other vaccines are in large-scale final stages of testing, including three that may soon also receive approval (Moderna, University of Oxford/AstraZeneca, and Sinovac).

The challenge now lies in the manufacturing, distribution and acceptance of these vaccines. In the beginning, the available doses will be extremely limited and prioritization within the population will be crucial. However, as each month goes by, production is expected to increase substantially. Pfizer/BioNTech expect to produce globally 50 million vaccine doses in 2020, but 1.3 billion by the end of 2021. The more we see other vaccines approved, the faster the distribution can occur globally. In particular, the AstraZeneca vaccine would be key as it has double the purchase commitments as the second closest vaccine. The last piece of the puzzle is acceptance by the population. An October Ipsos poll showed a wide variation around the world of intentions to get vaccinated. Interestingly, emerging markets have the highest acceptance rate (India, China, South Korea, Brazil all above 80%), while developed countries have the lowest (Italy, Spain, U.S., and France all below 65%).

But when will the global economy go back to normal? One region of the world has not needed to wait for a vaccine to largely return to normal: North Asia. There, aggressive testing and contact tracing procedures have kept COVID cases low and activity high. Elsewhere, the timing of mass vaccine distribution is key – and this varies significantly country by country (chart below). Given deep pockets, high income countries have already purchased 3.9 billion doses of vaccines, while middle income countries have only purchased 2.8 billion doses (as estimated by the Duke Global Health Innovation Center). Unfortunately, low income countries have been left out and will depend entirely on global projects like COVAX. As a result, developed countries are expected reach critical mass vaccination in mid-2021, middle income countries by end-2021 or early 2022, and low income countries not until 2023 or 2024. 

Even though the vaccine may take longer to be distributed in certain EM regions, EM markets will react in advance of the reality on the ground. In particular, these markets have a high representation of cyclical sectors (at 54% of the MSCI Emerging Markets index), which should benefit from a strong global economic recovery and an improvement in global risk appetite. With that said, it is a long and winding road towards full vaccination. Investors should take care beneath the surface to invest in companies that will survive the pandemic to thrive in the post-vaccine world. 

Vaccination coverage and need varies around the world
% of population covered by confirmed doses (y-axis) and COVID-19 cases per million people (x-axis)

Source: Duke Global Health Innovation center. (2020). Launch and Scale Speedometer. Duke University. Data are as of December 15, 2020.

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