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The recent developments in the coronavirus vaccine have greatly enlightened the prospects for the U.S. economy, as economists at UBS are refining their forecasts for the country’s GDP.
Pfizer and BioNTech announced on Monday that their vaccine for COVID-19 became 90% effective in preventing the deadly virus. The announcement sparked optimism that the epidemic could end sooner rather than later, powering up stock markets worldwide.
UBS, a Swiss financial services company, had previously projected that the coronavirus numbers in the U.S. would reach zero by the end of 2021. However, the vaccine proclamation has allowed the company to extend that forecast by six months.
“We probably see a situation where reported Covid infections fell to near zero in the second quarter (Q2) of next year. That difference of two-quarter is worth considering; it means an additional 1 to 1.25 percentage point surge in GDP next year,” chief UBS economist for the U.S., Seth Carpenter, said Thursday.
Carpenter added that the vaccine claim “was very motivating” as the efficacy rate was much greater than analysts estimated.
The United States has experienced over 10 million coronavirus cases since the beginning of the pandemic in early 2020. According to data from John Hopkins University, the nation has seen record highs this week in Covid cases and hospitalizations, with roughly 153,496 cases reported on Thursday.
This comes when speculations grow on whether the U.S. economy will be facing another shutdown.
“Closing businesses for four to six weeks could help reduce the cases and get the economy on track until a vaccine is testified and distributed,” an advisor to President-elect Joe Biden said.
Chicago Mayor Lori Lightfoot asked people to stay indoors and cancel any Thanksgiving plans as COVID-19 infections rise.
Carpenter’s remarks contrast with the caution described by experts such as Dr. Anthony Fauci, the White House advisor for coronavirus. He warned Thursday that a vaccine may not be enough to eradicate the disease.
“I doubt we’re going to eradicate this. I consider we need to have a plan about maintaining control over chronically. It may be something that becomes endemic, that we must be careful about,” Fauci said.
Fiscal livelihood
The U.S. economic performance in 2021 will also depend on the amount of fiscal stimulus that will be established. There is quite a lot of fuzziness about how much support will be granted as the country deals with the aftermath of the presidential election.
Carpenter expects the U.S. policymakers will frustrate markets by offering a lower-than-anticipated support package.
“We are generally a little bit pessimistic here regarding where the market is, so we have listed about a $450 billion package that comes in the first quarter (Q1) next year,” Carpenter said, adding that markets are hoping a round of incentive similar to the initial one, totalling $1 trillion.
According to UBS, the Senate may remain influenced by Republican policymakers. The bank believes the incentive could be doubled but still under the $1 trillion if the Senate were mostly Democratic politicians.