Emerging from the Great Lockdown in Asia and Europe
IMF Blog, May 12, 2020
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- Authors: Poul M Thomsen
- Published: May 12, 2020
Overview and context
- Several countries in Asia and Europe, where the COVID-19 outbreak appears to have peaked, are gradually reopening their economies.
- Policymakers face trade-offs between resuming economic activity and the potential cost of another increase in infection rates; costs of erring in either direction could be very large.
- Timing, sequencing, and pace of planned exits differ across countries; authorities are adopting gradual and sequenced approaches along with further prevention and containment measures.
Epidemiological situation (as described)
- To date, over 250,000 people in South and East Asia have been infected, and 9,700 have died.
- China, India, Indonesia, Japan, Singapore, and South Korea account for over 85 percent of all infections in South and East Asia.
- The number of confirmed cases of COVID-19 in Europe has reached 1.8 million, representing almost half the world’s total.
- The reported death toll in Europe stands close to 160,000, out of more than 280,000 worldwide.
Economic impact of lockdown measures
- China’s GDP dropped by 36.6 percent in the first quarter of 2020 (annualized and seasonally adjusted).
- Korea saw an output decline of 5.5 percent in the first quarter of 2020 (annualized and seasonally adjusted).
- In Europe, GDP declined by:
- 21.3 percent in France in the first quarter of 2020 (annualized and seasonally adjusted).
- 19.2 percent in Spain in the first quarter of 2020 (annualized and seasonally adjusted).
- 17.5 percent in Italy in the first quarter of 2020 (annualized and seasonally adjusted).
- The second quarter is expected to be worse than the first quarter.
How Asia is restarting economic activity
- China
- Reported new infections have stabilized at very low levels.
- Since mid-February, the government has been reopening the economy in a gradual, sequenced manner.
- Priorities: essential sectors, specific industries, regions, and population groups based on continuous risk assessments.
- Leveraging digitalization, big data and technology to support contact tracing.
- Complementary measures: large-scale testing, including the start of randomized screening in select provinces, systematic tracking via mobile phone apps, restrictions on movement and control measures on infected people and their contacts.
- Reopening has unfolded without a debilitating second wave so far, though risks remain as activity normalizes further.
- Korea
- Early containment based on large-scale testing, mandatory isolation of detected and at-risk cases, widespread use of digitalization and technology for contact tracing.
- Closure of schools and public facilities; comprehensive guidance on social distancing; quarantine measures for travelers.
- Domestic mobility and business activity were never widely restricted; resumption of economic activity is proceeding gradually and more or less automatically as social distancing recedes.
- Transitioned to less stringent guidelines for “Daily Social Distancing,” which direct citizens to stay home when feeling ill, keep personal distance, wash hands frequently, wear face masks, and ventilate indoor spaces regularly.
- Singapore
- Initially succeeded in containing contagion following a strategy similar to Korea’s.
- Tightened containment measures in early April in response to a new outbreak.
Europe’s gradual reopening
- Approaches and sequencing differ across countries, reflecting differences in epidemic progress and national preferences.
- Examples of country-specific reopening steps:
- Denmark and Norway: started by reopening lower schools and services.
- Spain: lifted restrictions in manufacturing and construction, and for some small businesses, including retail, with safety measures.
- Germany: lifted restrictions on retail shops and is gradually re-opening schools; relaxation is subject to a break mechanism allowing for re-tightening if needed.
- Italy: reopened manufacturing and construction (under strict safety rules) and select small stores.
- France: allowed reopening of primary schools, shops, and industry on a differentiated regional basis, as of May 11.
- Sweden:
- Distinctive approach by not fully locking down activity; too early to assess effectiveness.
- All countries plan to use health and social distancing measures to mitigate risk of a new wave, varying by type and intensity.
Looking ahead — risks and policy guidance
- Europe appears to be reopening its economy earlier in the epidemic cycle than China.
- Capacity for large-scale testing, contact tracing, and case isolation in Europe may lag behind the best examples in Asia, partly reflecting stringent privacy rules.
- The European Commission recommends tracking apps, but only on a voluntary basis.
- Consequently, Europe appears to be more at risk than some Asian countries, including China, though no country can confidently declare victory against the virus.
- Policy guidance and considerations:
- Move cautiously and resist the urge to do too much too soon to avoid risking a relapse.
- Ensure wide-reaching measures to quickly identify and contain new infections before moving too early.
- Maintain health and social distancing measures as part of reopening strategies to mitigate the risk of a new wave of contagion.
Poul M. Thomsen — May 12, 2020
