A Coronavirus vaccine could add 1 percentage stimulus to U.S. GDP, an economist from UBS said

The recent developments for coronavirus vaccine have very much enlightened the prospect for the U.S economy, as economists at UBS refining their forecasts for the country’s GDP.

Covid-19 vaccine and the U.S. economy
Seth Carpenter, chief U.S. economist at UBS, talking during a program on CNBC.

Pfizer, along with BioNTech, has announced on Monday that their vaccine for Covid-19 became 90% effective in preventing the deadly virus. The announcement passed optimism that the epidemic could come to an end sooner rather than later, powering up stock markets worldwide.

UBS, a Swiss financial services company, had formerly projected that the coronavirus numbers in the U.S. would reach zero by the finishing of 2021. However, the vaccine proclamation has made the company bring that forecast onward by six months.

“We probably see a situation where reported Covid infections fell very near to 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 came much greater than analysts were estimating.

The United States has experienced over 10 million coronavirus cases since the beginning of the pandemic in early 2020. The nation has seen record highs this week in terms of Covid cases and hospitalizations, with roughly 153,496 cases reported on Thursday, according to data by John Hopkins University.

This comes at a time 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.

Lori Lightfoot, Chicago Mayor, asked people to stay indoors and cancel any Thanksgiving plans as Covid infections rise.

Carpenter’s remarks contrast to the caution described by experts such as White House advisor for coronavirus Dr Anthony Fauci. He warned Thursday that a vaccine possibly 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 have to just be careful about,” Fauci said.

Fiscal livelihood

The U.S. economic performance in 2021 will also subject to the amount of fiscal stimulus that will be set up. There is quite a lot of fuzziness at the moment as to 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, there are chances that the Senate will remain influenced by Republican policymakers. The bank believes the incentive could be double, but still under the $1 trillion if the Senate were to consist of Democrat politicians mostly.

A professional writer since 2014 with a Bachelor of Arts in Journalism and Mass Communication, Nathan Enzo ran the creative writing department for the major News Channels until 2018. He then worked as a Senior content writer with LiveNewsof.com, including national newspapers, magazines, and online work. He specializes in media studies and social communications.