Vaccination progress picks up the pace in Asia

After a slow start, Asia’s vaccination campaign is starting to gain significant traction with most economies in the region reporting record numbers of daily doses administered in June.

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As a larger proportion of the local population gets vaccinated, economic activities will resume in stages. The experience of the UK and US suggests a reopening threshold at 40-50 per cent of people fully vaccinated.

"Many governments in Asia are accelerating their vaccine roll-outs in the wake of recent coronavirus resurgences.”

Mainland China, Singapore, South Korea and Hong Kong are on track to vaccinate the majority of their population by the third quarter of     this year, paving the way for a less disruptive ‘new normal’. Meanwhile, Taiwan, Malaysia, Thailand and Cambodia also look likely to be in a position to lift most pandemic curbs by year-end.

For the region’s more populous and lower per capita income economies, a full reopening looks more likely in 2022 or beyond, for now.

Vaccine coverage remains low…

Amid low vaccine coverage, many Asian economies have had to grapple with fresh waves of the COVID-19 infections in the second quarter and retighten restrictions which have in turn weighed on activity and put a drag on the recovery. In particular, the experiences of Taiwan and Vietnam are a reminder of the persistent risk of fresh outbreaks in spite of past containment success.

Social distancing will remain a predominant tool for outbreak containment until widespread vaccine coverage is achieved. As things stand, the region’s vaccine coverage has lagged that of advanced economies. Within Asia, Singapore has made the fastest progress in its inoculation program but even its government reacted to the latest infection wave with the tightest restrictions since June 2020. Those restrictions are beginning to be lifted, alongside rising vaccination rates, but the current measures are still materially more stringent than those in place in the first quarter.

... but the roll-out is gaining significant traction

That said, it is encouraging many governments in Asia are accelerating their vaccine roll-outs in the wake of recent coronavirus resurgences by stepping up procurements of vaccine doses, improving delivery and distribution logistics, updating vaccine policy and boosting domestic production, where possible.

Notably, most economies in the region saw new highs in their vaccination rates in June. An increase in the delivery of vaccine doses has been a key contributor; the recent virus resurgences and circulation of the more transmissible Delta variant have also made the public more concerned about their health, reducing vaccine hesitancy and raising demand.

Changes to governments’ vaccination policies are also helping to provide a boost. For instance, India’s updated policy now promises free vaccines for all people above the age of 18 in the country. Incentives have also boosted the take-up rate in places like Hong Kong where vaccine resistance was more of an issue than the availability of vaccine doses.

Reopening timelines

The pace of the vaccination program is a key indicator as it will shape the reopening timelines across Asian economies. To get a sense of the extent of vaccine uptake needed to assure policymakers to lift pandemic-related restrictions, it can be helpful to look at other economies that are ahead in the vaccination curve.

The experience of the US and UK suggests a threshold in the 40-50 per cent range. In the US (around 45 per cent of the population has been fully vaccinated and roughly 53 per cent has received at least one dose of vaccine at the nationwide level), most states have lifted the bulk of their COVID-19 restrictions.

The UK government initially planned to fully reopen the economy on 21 June but subsequently decided to postpone the date to 19 July, when it expects two-thirds of the adult population to be fully vaccinated, or equivalent to roughly half of the total population.

Bottom line

It is now well-recognised that sufficient vaccination coverage is required for the world to arrive at a less disruptive ‘new normal’, by paving the way to an easing in movement curbs and restoring public confidence. The risk of fresh outbreaks will also fade, and the accompanied reduction in financial uncertainty should bode well for a recovery in business investment and household consumption. Exports have led the recovery in Asia so far and for domestic demand to catch up wider vaccine coverage is crucial.

With the pace of vaccination varying widely among Asian economies, their reopening is expected to be staggered. As things stand, there are still significant uncertainties on the timeline. The emergence of more transmissible variants can significantly push up the vaccination rate needed to achieve herd resilience. Vaccine efficacy against virus mutations may also be a watch point.

Still, it is encouraging that vaccine rollouts are speeding up across the board, and economies that cumulatively make up almost 80 per cent of the region’s gross domestic product (or roughly half for Asia excluding China) are on track to achieve high vaccination rates and (almost) fully reopen their domestic economies within the year. Another potential upside is an increased in donations of surplus vaccines from advanced economies which will in turn help speedup vaccination progress worldwide, including in Asia.

Overall, there are reasons to be cautiously optimistic we may finally be seeing the beginning of the end of the COVID-19 drag on the region’s growth.

Krystal Tan is Economist at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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