Germany's AstraZeneca move could stymie recovery, economists say

Germany's decision to suspend AstraZeneca's Covid-19 vaccine could delay progress in reaching herd immunity and postpone a much-hoped for easing of lockdown measures needed for a robust recovery in the second quarter, economists said on Tuesday.

Health Minister Jens Spahn described Monday's move on the AstraZeneca shot as a precaution, making Germany the latest of several European countries to hit pause following reports of blood coagulation disorders in some recipients.

The government's decision was based on a recommendation from the politically independent Paul Ehrlich Institute (PEI), Germany's authority in charge of vaccines, following newly registered cases of a very rare cerebral vein thrombosis, including three deaths.

"From an economic point of view, the problems with the AstraZeneca vaccine come at a highly unfavourable time," Commerzbank chief economist Joerg Kraemer said, pointing to an increasing number of new coronavirus infections in Germany.

The crucial question now is how long use of the AstraZeneca vaccine will remain suspended, Kraemer said.

EU countries that have halted AstraZeneca shots are awaiting the all-clear from the European Medicines Agency. It was due to give a news conference on Tuesday at 1300 GMT.

"If it were no longer allowed to be used permanently, the point where Germany will reach herd immunity will be delayed by one to two months," Kraemer said.

'Game changer'

In such a scenario, politicians would probably be forced to put the brakes on any further easing steps, which could delay the economic recovery, he added.

ING chief economist Carsten Brzeski said the suspension of the AstraZeneca vaccine was increasing the risks that the economic recovery could be delayed into the third quarter.

"The decision is a game changer - at least in the short term," ING chief economist Carsten Brzeski said.

Brzeski said the move not only delayed what has already been a slow vaccination rollout, but also increased general vaccine scepticism among Germans as significantly fewer people might now be willing to get the AstraZeneca shot voluntarily.

Germany's second lockdown has stopped a recovery in Europe's largest economy, but recent data for the first quarter suggest there won't be a "drastic plunge" in gross domestic product as seen during the first lockdown, the Statistics Office said.

The German economy suffered an unprecedented plunge of 9.7% in the second quarter of 2020 due to the impact of the first lockdown. It then registered record growth of 8.5% in the third quarter and continued to expand by 0.3% in the fourth quarter despite new curbs to contain a second wave of infections.

A survey by ZEW economic institute conducted before the vaccine decision showed on Tuesday that investor sentiment in Germany increased by more than expected in March, buoying the outlook for a broad-based recovery.

Recent German data has painted a picture of a two-speed economy, in which export-oriented manufacturers are doing well while domestically driven services are suffering under lockdown measures imposed in early November and tightened in mid-December.

"Economic optimism continues to rise. Experts expect a broad-based recovery of the German economy," ZEW President Achim Wambach said in a statement.