Vaccine optimism reduces EM risks

▀ The positive developments on Covid‐19 vaccines are broadly in line with our baseline forecast for emerging markets – we expect a noticeable impact from mass vaccination programs from around mid‐2021. Our in‐house survey reveals the news has reduced downside risks for 2021 for the great majority of EMs. ▀ But vaccines programs will diverge significantly across EMs. Apart from China and Russia, which are developing their own vaccines, Chile tops the EM league for pre‐ordered doses, at more than twice the population (Figure 1). Other EMs have also secured access to large quantities. But many will fall short of inoculating even 30% of their populations, which may force governments to maintain contact and mobility restrictions to contain the pandemic. ▀ Over time, the global COVAX facility should ensure access to vaccines for countries missing in the initial ordering race, though its starting supply is scarce and re‐deployment of excess doses will be protracted. Domestic distribution will also be drawn‐out in many geographies, stymied by poor infrastructure, including intermittent access to power. ▀ Meanwhile, vaccine progress in advanced economies and buoyant global financial markets should support demand. Consequently, prospects will be brighter for countries that saw large recessions last year and can implement vaccination programs swiftly – Eastern Europe and Mexico fall in this group – though the outlook for tourism will remain challenging.