Stocks tumbled and government bonds rallied on Nov. But the risk of the world’s Covid-19 recovery stalling has increased. It’s too early to say whether such interventions will be necessary. With inflation spiking in the United States and Europe, they have limited ability to delay planned increases in interest rates or unleash further stimulus. Moreover, central banks have spent a lot of their firepower managing the economic fallout from the virus. The increased risk to emerging markets was evident in the decline of currencies like the South African rand. Shares in British Airways owner International Consolidated Airlines were down 12% on Friday morning, while easyJet stock fell 10%. But the reaction to the prospect of a new round of travel bans highlights the fragility of the recovery.
They have developed vast testing capabilities and stocked up on protective equipment. In contrast to February 2020, when many countries were slow to respond to the pandemic, governments are better prepared. Meanwhile China, which has controlled the virus by largely shutting out foreign visitors, may be minded to further extend its travel ban. Austria has already imposed a national lockdown due to soaring infections and stubbornly flat vaccine rates. But European countries also look vulnerable. Less than a quarter of South Africa’s population is fully jabbed, and the country’s dense population means that highly infectious mutations take off faster than elsewhere. Countries with low vaccination rates are most at risk.