Strategy Note /

Covid in emerging markets: Where's already infected, vaccinated and re-opening

  • High incidence of prior Covid infection, high vaccination rate, looser restrictions should mean organic growth pick up

  • Our screen highlights, for example, Brazil, Poland, Turkey, Qatar, UAE in EM and Georgia, Iceland, Mauritius in FM

  • And flags ongoing risk in, for example, Egypt, Indonesia, Taiwan, Thailand, South Africa in EM, and Kenya, Vietnam in FM

Covid in emerging markets: Where's already infected, vaccinated and re-opening
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
2 September 2021
Published byTellimer Research

Emerging markets with a high incidence of prior Covid infection, a high full vaccination rate and looser restrictions on activity should see a pick up in organic growth – ie they should be less reliant on local monetary and fiscal stimulus, and the persistence of globally loose monetary conditions (low US yields).

Life after Covid: High degree of protection and re-opening

Countries with high protection (a combination of past infection and vaccines, using an index weighted more to past infection) and re-opening for activity include the following:

  • Africa: Mauritius;

  • Europe: Croatia, Georgia, Iceland, Poland, Turkey;

  • LatAm: Brazil;

  • Middle East: Qatar, the UAE.

Countries elsewhere that are getting close include the following:

  • Africa: Morocco;

  • Europe: Kazakhstan, Romania, Russia;

  • LatAm: Peru;

  • Middle East: Jordan, Kuwait, Lebanon, Saudi Arabia.

In Asia, Malaysia and South Korea should join this list soon, assuming the current pace of vaccine rollout continues for both and, for Malaysia, the planned lifting of its lockdown proceeds.

Countries that have seemingly high protection, but still have many restrictions in place, include the following:

  • Africa: Tunisia;

  • Asia: China, Sri Lanka;

  • LatAm: Argentina, Chile.

Why might these countries be keeping restrictions on activity in place (assuming the data on policy stringency is not lagging in a discriminatory way for these countries alone)? Candidate explanations are that these governments are concerned that healthcare capacity may be insufficient for any spike in hospitalisations, or they are nervous of pent-up social unrest should restrictions lift (eg Argentina, Chile), or they do not trust their own data on case numbers and the vaccine rollout.

Countries that have low protection and remain reliant on economically damaging lockdown policies are the following:

  • Africa: Kenya, South Africa, Zimbabwe;

  • Asia: Bangladesh, India, Pakistan, the Philippines, Taiwan, Thailand, Vietnam;

  • Europe: Ukraine.

Potentially, the longer that some of these countries struggle with the rollout of vaccines, the more tempted they will be to release lockdown restrictions and suffer Covid consequences for fear of avoiding even worse consequences of starvation. Bangladesh, Pakistan and South Africa are arguably already close to adopting this approach.

Countries that have low protection, are not quickly rolling out vaccines and appear unwilling (or under no pressure) to impose lockdowns include the following:

  • Africa: Egypt, Ghana, Nigeria, Tanzania.

Vaccination accelerating in parts of EM

Covid vaccination still lags well behind EM, in general, compared with developed markets, but, in pockets, there is a ramp-up underway.

Living with Covid part 1a: Full vaccination lags in EM

Living with Covid part 1b: Vaccination ramping in some EMs

But prior infection data merits a revisit

However, doubts over the lasting efficacy of vaccines suggest a revisit of cases data (ie protection from prior infection).

Indeed, there is a case for attaching much more weight, in a positive sense, to countries with a high declared incidence of Covid, than simply countries with high declared vaccination rates.

  • Declared infection data universally understates the likely true incidence of Covid because of incomplete testing (particularly in asymptomatic cases and non-hospitalisation cases, and in poorer communities and countries without access to testing infrastructure).

  • Declared data on incidence of infection may bring into question all data released by that country. For example, is it realistic that China's declared cumulative case numbers amount to under 1% of its population and, if so, does that bring into question its declared full vaccination rate of over 60% of the population?

  • Prior infection may be a much better indication of longer-lasting protection (without one follow-on or perhaps multiple vaccine booster shots), and it is likely that not all vaccines administered have equal efficacy, particularly against new strains of the virus.

Living with Covid part 2: Incidence of recorded cases

Lockdowns and support cannot last

Living with Covid part 3: Restrictions and economic burden

Related reading

Emerging-Frontier Equity Monthly – August: Taper, Covid, Afghanistan, August 2021

Slow Covid vaccination in EM is everyone's problem, from US to Africa to Vietnam, July 2021

Death by Covid-19 or starvation: Your Hobbesian Hobson’s choice in poorer EM, April 2020

Politics, economics, business and EM post-Covid crisis, April 2020