Now that the Delta variant has revived fears about renewed COVID outbreaks from the US to Europe to Asia, a team of analysts at Goldman Sachs has published its analysis of the risks posed by the mutated strain. The conclusion: since full vaccination remains effective at preventing infections, countries with low vaccination rates are the most vulnerable to another outbreak of the Delta variant.
As Goldman pointed out in an earlier note, the Delta variant represents a growing share of new COVID cases.
Accordingly, the Goldman team sees the risk of high hospitalizations and fatalities, followed by economy-damaging lockdowns, as rising most rapidly in Russia, South Africa, and Indonesia.
However, a more important takeaway involves the difficulty of achieving "COVID zero", something no country - not even China - has managed to achieve. If nothing else, the rise of the Delta variant likely increases the risk that COVID will become endemic like the flu.
Of course, most countries have already come to terms with the fact that "COVID zero" probably isn't a realistic public health goal.
But in Australia, Israel and China, it could complicate authorities efforts to move past the crisis (though Goldman expects a gradual H2 recovery in consumption as infections "stabilize" in Australia and continue to decline in China).
The most likely scenario implies a slightly slower global reopening, with the risk highest in countries with low vaccination rates. Still, "our global GDP growth forecasts of 6.6% in 2021 and 4.8% in 2022 therefore remain optimistic in absolute terms, although they are now closer to the consensus than at any point since April 2020."
The rest of Goldman's note consisted of a Q&A where analysts answered clients' questions:
Q. The Delta variant (first identified in India) is estimated to be 50-60% more transmissible than the Alpha variant (first identified in the UK). How effective are the Western vaccines against the Delta variant?
A. While the Delta variant weighs on the efficacy of vaccines (and especially single doses) at preventing infections (especially asymptomatic infections), Pfizer and AstraZeneca full vaccinations remain highly effective at protecting hospitalizations, and Moderna and J&J lab results look encouraging
A study from Public Health England estimates elevated Delta-specific efficacies at preventing hospitalizations of 94%/96% after one/two Pfizer doses and 71%/92% after one/two AstraZeneca doses. Public Health England estimates lower efficacies at preventing symptomatic disease after two doses for Pfizer of 88% and 60% for AstraZeneca. Similarly, a new study from Canada also estimates an 87% efficacy of full Pfizer vaccinations to prevent symptomatic disease. The symptomatic efficacy, however, is lower after one dose and estimated at one-third for both Pfizer and AstraZeneca in the English study, and 56%/72% for Pfizer/Moderna in the Canadian study
Yesterday, Israel’s Health Ministry reported a 64% effectiveness of the Pfizer vaccine in preventing any infections and a 93% effectiveness in preventing hospitalizations. The 64% estimate likely corresponds to the effectiveness to prevent both asymptomatic and symptomatic infections while the studies from England and Canada and clinical trials assess symptomatic infections. Taken at face value, these headline numbers suggest a reduced ability of the Pfizer vaccine to stop the transmission of Delta infections relative to previously dominant strains, although the “additional” infections are more likely to be asymptomatic.
Finally, in vitro studies from Moderna and Johnson & Johnson demonstrate their ability to neutralize the Delta variant with neutralizing titers that were lower compared to the ancestral strain but higher than for the Beta variant (first identified in South Africa), where high efficacy against severe disease was clinically demonstrated.
Q. How effective are the Eastern vaccines against the Delta variant?
A. Although data remain very limited, Chinese and Russian expert commentary and clinical trial results from India’s Bharat Biotech suggest that the Sinopharm, Sputnik V, and Bharat Biotech vaccines provide solid protection against severe disease.
Q. What about Delta’s impact on reinfection risk?
A. Although the data are particularly limited, research and experts suggest that prior infections continue to provide some protection against Delta, especially against severe disease.
Q. The UK is experiencing a surge in infections although hospitalizations and especially fatalities remain relatively low (Exhibit 2). What drives this “decoupling” and will it continue?
A. This mostly reflects the concentration of new infections among younger individuals but also a stronger vaccine protection against hospitalizations than against infections (especially for AstraZeneca). We therefore expect this decoupling to continue.
Q. Are infections and hospitalizations/fatalities also “decoupling” outside of the UK?
A. Most other economies with high vaccination rates and Delta outbreaks are also experiencing this decoupling, although it is particularly pronounced in the UK. We expect hospitalizations to remain relatively low in high vaccination countries.
Q. Does the virus still matter for activity in North America and Europe if hospitalizations stay low?
A. Yes. The virus GDP drag should, however, be much diminished and reflects travel restrictions, consumer risk aversion, and lingering softness in labor supply
Q. Twenty-two US states have vaccinated less than half of their populations (Exhibit 11) and infections are rising rapidly in several low vaccination states. Do we not expect sharp Delta-induced rises in hospitalizations and substantial economic damage in these states too?
A. While hospitalizations have already picked up in Arkansas, Missouri, and Nevada and are likely to increase further, we expect relatively limited economic damage for three reasons. First, higher elderly vaccination rates should limit the increase in hospitalizations (Exhibit 11). Second, the generally higher immunity rates from prior infections in these states should also limit the increase in hospitalizations (Exhibit 12, left panel and appendix). Third, the virus sensitivity of economic activity tends to be lower in low vaccination states (Exhibit 12, right panel).
Q. The Delta variant has raised the theoretical bar to achieve herd immunity to probably at least 85% of the population. Does vaccine hesitancy imply that countries will never approach such high immunity levels?
A. Not necessarily, and many medical experts believe the coronavirus will eventually turn from a pandemic to an endemic stage. The Delta variant likely implies higher ultimate vaccination rates (and immunity rates). In fact, further outbreaks appear to be sharply boosting demand in several countries, including the US, China, Australia, Israel, and especially Portugal (Exhibit 13).
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Source: Goldman Sachs