spence142_PATRICK T. FALLONAFP via Getty Images_heatwave Patrick T. Fallon/AFP via Getty Images

A World of Heat and Headwinds

The outlook for the global economy has gone from hopeful to bleak in the space of just a few months, owing to the rise of the Delta variant, climate-driven disasters, and previously underappreciated supply-chain disruptions. In fact, it is now hard not to conclude that future growth and development are in peril.

PORTOVENERE, ITALY – As recently as three months ago, the global economy seemed to be on track for a relatively robust recovery. The supply of COVID-19 vaccines had expanded in the developed countries, raising hopes that it would spill over to developing countries in the second half of 2021 and into 2022. Many economies were posting impressive growth numbers as pandemic-suppressed sectors reopened. While clogged supply chains had produced a host of shortages and high prices for key inputs, these were seen as merely transitory problems.

The world looks very different now. The Delta variant is spreading rapidly, including in developed countries and among cohorts who were hitherto less vulnerable to the virus. The unvaccinated parts of the world – mostly lower-middle and lower-income countries – are now more vulnerable than ever. 

Moreover, the vaccine supply chain is failing. The principal reason is that developed countries have option contracts to buy many more vaccine doses than they need (even after accounting for an expansion of their programs to vaccinate younger people and administer booster shots). This lengthens the vaccine queue, thereby delaying the arrival of vaccines in much of the developing world.

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