By Greg Ip
The biggest shock to the global economy in a century is mutating
-- literally.
More-virulent and potentially deadlier variants of Covid-19
first identified in Britain, South Africa and Brazil are spreading,
just as the rollout of vaccines had raised hopes for a broad-based
economic recovery.
The new variants pose two threats. First, to counteract the
higher risk of infection, restrictions on activity may be
tightened, pushing some economies back into recession. Britain,
where one fast-spreading variant is now widespread, re-entered a
full lockdown on Jan. 5. Its economy, which shrank 10% last year,
is likely contracting now. The International Monetary Fund said
Tuesday it would grow 4.5% this year, down from its October
forecast of 5.9%. Tobias Adrian, director of the IMF's monetary and
capital markets department, said a widespread, more transmissable
virus could become a "real headwind" for economic recoveries.
The second threat is of a possible new variant that is resistant
to the immunity conferred by existing vaccines and past infections,
which could trigger a new cycle of restrictions and require a new
round of vaccinations.
If such a variant emerges, manufacturers think vaccines can be
updated relatively quickly. Nonetheless, James Stock, an economist
at Harvard University who has studied the virus and the economy,
warned of a "scenario of this thing sticking around for a much
longer time frame."
"All the economic adaptations have been viewed as temporary:
restaurants at 25% capacity and so forth," he said. "If this were
to become chronic there would have to be really massive
reorganizations" of the U.S. economy.
Singapore's education minister, Lawrence Wong, who co-chairs his
government's Covid ministerial task force, said Monday, "It may
take four to five years before we finally see the end of the
pandemic and the start of a post-Covid normal."
Mutations are intrinsic to viruses -- and economies, for that
matter. Financial crises recur because financial innovation
eventually circumvents regulations put in place after the last
crisis. Similarly, viruses mutate all the time, and natural
selection dictates that the variants best able to reproduce
eventually predominate.
Viruses, though, mutate much faster than finance. Nearly 300,000
variants of Covid-19 have been detected in the past year, according
to a paper by Eduardo Costas, a professor of genetics at the
Complutense University of Madrid, and two colleagues.
To gain a foothold, variants such as the U.K.'s must acquire
highly advantageous mutations -- relatively rare in combination.
But as more people in the world are infected, the likelihood grows
that new highly infective mutant strains will appear, Mr. Costas
said in an email.
"It's like playing the lottery with a lot more numbers," he
added.
The U.K. variant, dubbed B.1.1.7, spreads 30% to 70% faster and
may be 30% to 40% deadlier than earlier variants, according to
scientists. This implies non-pharmaceutical interventions such as
masks and social distancing have to be dialed up significantly to
keep deaths unchanged. It also means more people must be infected
or vaccinated to achieve "herd immunity," when the epidemic dies
out.
In Britain, David Mackie of J.P. Morgan estimates, the new
variant has raised the virus's reproduction number -- how many
people each infected person goes on to infect, in the absence of
immunity or interventions -- to 4.9 from 3.3. Masks, hygiene and
social distancing have pushed the reproduction number below one,
the threshold at which cases decline. This has come at a steep
cost: The British economy is almost certainly shrinking.
Indeed, as the importance of restrictions on activity to saving
lives could be going up, the public's tolerance for them is going
down, as recent riots over a curfew in the Netherlands demonstrate.
In the U.S., some states have refused to enact restrictions, and
most others are targeting only high-risk activities such as indoor
dining.
Still, if cases surge again restrictions would likely intensify
-- and even if they didn't, more people would voluntarily social
distance. Either would undercut the recovery. Goldman Sachs
estimates a delay in achieving herd immunity would set back the
U.S. recovery by two months and trim growth this year by 2
percentage points.
Widespread administration of existing vaccines should snuff out
epidemics linked to current variants. But the probability of a
vaccine-resistant variant rises with time and world-wide cases.
"This is one reason why it's important not to think just locally
but globally," said Alessandro Vespignani, a Northeastern
University scientist who models pandemics. "We could have a
perfectly rolled-out vaccine campaign in the U.S. and Europe. But
if we let the virus go wild and have a lot of cases in other
places, that could boomerang -- there might be a variant able to
escape our immune-system protection."
This puts added pressure on the Biden administration and
governments of other wealthy nations to speed up vaccination not
just at home but in poor countries as well, to minimize the number
of variants. The IMF assumes a vaccine will be broadly available by
this summer in most advanced and some developing economies, but not
till the second half of 2022 in the rest of the world.
Mr. Vespignani added, "We need an infrastructure in place so
that whatever goes wrong, we are much better prepared than in
March, April and even now." That means more widespread genomic
surveillance for dangerous variants; the capacity to quickly update
and administer vaccines to the entire population; and widely
available cheap and rapid testing to contain outbreaks.
Write to Greg Ip at greg.ip@wsj.com
(END) Dow Jones Newswires
January 27, 2021 17:26 ET (22:26 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.