The Economic Impact of Lockdowns
Numerous countries have imposed lockdowns to tackle the spread of the New Coronavirus (Covid-19) that has killed more than 35,000 people globally. A lockdown is defined as the restriction of access to enter or leave a neighborhood, region or nation.
Covid-19 reportedly originated in a wet market in Wuhan, China, and subsequently spread quickly across the globe. The symptoms, which include a high fever, coughing, and breathing difficulties, sometimes overlap with those of the flu or other respiratory diseases such as SARS and pneumonia.
Lockdowns can be the most effective solution to curb the infection. However, implementing a lockdown is not an easy decision, nor is it simple given several considerations must be taken into account including the massive economic consequences.
Airline and Tourism Sectors Worst-Hit By Lockdowns
The coronavirus outbreak and resulting self-quarantining and lockdowns have particularly hurt several business sectors, namely the airline, tourism, and retail industries. According to the IATA (International Air Transport Association), the global airline sector is predicted to suffer a revenue loss worth $252 billion due to the pandemic which has infected 201 countries so far.
The tourism industry is one of the hardest hit by the outbreak as most countries have issued a travel ban to contain the virus. The World Travel and Tourism Council (WTTC) estimated that 50 million workers will lose their jobs in the tourism sector, as Reuters reported.
The tourism industry in Europe has lost $1.11 billion a month due to the pandemic, as the European Union (E.U) Internal Market Commissioner Thierry Berton said. Ten percent of the continent’s GDP comes from the tourism industry, as the European Travel Commission confirmed.
Italy’s hotel cancellation rate reached 90 percent, and 13 percent of the Italian economy consists of tourism. Italy has the highest Covid-19 death toll. As of March 30, the virus has killed over 11,590 people in the country so far.
Lockdowns Put Pressure on the Global Economy
Morgan Stanley predicts that the global economy would grow by 0.3 percent throughout 2020, but there will still be a -2.3 percent contraction.
“As the underlying drivers of the global recovery remain intact, growth should recover once the effects of the disruption fade,” the bank stated in a Reuters report.
International Monetary Fund (IMF) Managing Director Kristalina Georgieva said the outbreak would affect the lender’s 189 member countries, predicting that global growth in 2020 would stand at below 2.9 percent, and its revised outlook will be released in the coming weeks.
The Lockdown Dilemma
Lockdowns can be a dilemma for governments across the globe. They may suppress Covid-19’s death toll, but they can also trigger social unrest that can lead to panic buying. Also, low-income workers can be the most vulnerable to such measures.
India’s decision to impose a lockdown triggered panic buying. As many factories and offices there closed, thousands of migrant workers have vacated the country’s main cities, such as the capital Delhi, to return to their hometowns on foot.
According to Indonesian economist Rus’an Nurdin, lockdowns can minimize the impact of a recession caused by the pandemic. He suggested the Indonesian government can apply these three policies at a national level; the government must identify the group hardest hit by the crisis, they must reallocate the budget and then prepare for inflation.
Lockdowns Cause GDP to Plummet Sharply But They Can Speed Up Recovery As Well
Indonesia’s public policy expert Harryadin Mahardika echoed Nurdin’s statement, saying that lockdowns can cause GDP to plummet sharply, but they can speed up recovery rates as well. Whether or not governments isolate their regions is up to them. However, when a country is ready for a lockdown, it must protect the most vulnerable from both the virus and the impact of a lockdown.