The underwhelming vaccine rollout in Europe will probably delay the easing of restrictions and means that the best of the vaccine bounce will be pushed into Q3. That said, the planned EU-wide vaccine passport offers a lifeline for tourist-dependent countries and may limit the damage to summer seasons.
- The underwhelming vaccine rollout in Europe will probably delay the easing of restrictions and means that the best of the vaccine bounce will be pushed into Q3. That said, the planned EU-wide vaccine passport offers a lifeline for tourist-dependent countries and may limit the damage to summer seasons.
- Much ink has been spilled about the slow vaccine rollout in the EU and the strains on the bloc’s coordinated approach. German Finance Minister, Olaf Scholz, perhaps best summed up the mood on the continent by reportedly describing the European Commission’s vaccination strategy as a “total sh*t-show”. As it stands, administered jabs per person in the EU are currently about one quarter of those in the UK. (See Chart 1.)
- Amid all the gloom, there are some encouraging signs that we have passed rock bottom, particularly on vaccine supply. The factory upgrades that caused Pfizer to slow deliveries earlier this year have been completed, and the EC has secured more supplies of it and the Moderna vaccine this year. Meanwhile, the one-dose jab from Janssen/J&J is set to be approved by the European Medicines Agency in mid-March and other vaccines could follow in Q3. Even allowing for further production issues, there should comfortably be enough doses to meet the EU goal of vaccinating 70% of adults by the end of September. (See Chart 2.)
- Meanwhile, the recent volte-face from the French government to now allow the AstraZeneca vaccine to be given to older people seems set to be copied elsewhere. This may reduce some of the hesitancy that has dogged take-up so far and ensure that available supplies get used. Finally, the fact that warmer weather is edging closer may buy the authorities time to plough on in the summer when supplies will be more plentiful.
- So what does all this suggest about when restrictions will be lifted? It is difficult to be sure, particularly given that different governments are likely to proceed at different speeds. Moreover, despite the comparatively slow progress, the fact that European governments will probably start to ease restrictions when the weather is warmer might allow them to proceed more quickly than in the UK. That said, we think the slow rollout will have delayed things by a month or so. While our working assumption has been that the most economically damaging curbs would be lifted in May and June, it now seems likely that restrictions will stay in place for the bulk of Q2, pushing the best of the post-easing bounce into Q3.
- Worries about importing more transmissible and/or vaccine-resistant variants of the virus mean that the lifting of curbs on domestic activity will take precedence over international travel restrictions, which bodes ill for the most tourism-dependent economies. (See here.) That said, while the spread of new variants is a major uncertainty, the news that the EC hopes to have an EU-wide vaccine passport in place by the summer raises hopes that the key tourist season will not be a total write-off.
Chart 1: Total Vaccines
Chart 2: Indicative EU Vaccine Delivery Schedule (Million Doses)
Sources: Our World in Data, Various Media & Reports, Capital Economics
David Oxley, Senior Europe Economist, email@example.com