A great deal of data but not much certainty. Exit strategies will be even harder than lockdown. Markets seem heartened by resolute government and central bank response and the hope that we are approaching the peak.

COVID-19 Economic and Epidemiological Impact – Analysed in just a few gobbets for time-starved, over-solicited decision-makers

 

  • We are bombarded daily with a relentless stream of data, but four months after the beginning of the outbreak, we still know very little. The ratio undetected / confirmed cases, the fatality rate, the rate of transmissions from asymptomatic individuals, the seasonality effect, the length of the incubation period, the national infection rates: all these and many others remain ‘known unknowns’. This makes it virtually impossible to come up with the right public health strategy: in Spain for example, estimates for the number of people infected range from 1.8 million to 19 million.
  •  It follows that numbers are (almost) meaningless everywhere. Even the numbers of deaths caused by Covid-19 are questionable. Italian authorities recognise that the death toll is far higher than reported (many die uncounted as the over-stretched health-care system struggles to save the living) while in the UK the ONS (Office for National Statistics) says the figures could be almost 80% higher than initially reported. Meanwhile, there is growing scepticism about Chinese numbers – also true for Iran, Russia, Indonesia, North Korea, and probably for Saudi Arabia and Egypt.
  •  The issue of “exit strategies” is very high on the political agenda. It will be fiendishly complex, resembling more a “progressive opening strategy” with slow and phased returns to work in some industries (retail, construction, etc.) Combined with continuing restrictions in others (hospitality, physical entertainment, events, etc.). Most likely, restrictions will be re-imposed here and there until a vaccine is widely available (in the Spring of 2021 at the earliest). Mass community testing, combined with contact tracing, will be a critical component of any exit strategy.
  •  When might a return to some semblance of normalcy take place in Europe and the US? Different estimates suggest in most Western countries it could take about a month between the initial lockdown and the peak (an important epidemiological and psychological threshold). Then, it will be another few weeks before the lockdowns can be lifted (Wuhan was sealed from January 23rd to April 8th: two months and a half). For the US, this means late May or early June. Europe is further down the pandemic road – and significantly so for some countries like Denmark, Austria, Norway and Italy.
  • China is not a good proxy for the rest of the world, but the example of Wuhan is illustrative of the bumpy road ahead globally. The city where the virus originated is emerging today from its 2.5 months of lockdown. But its 11 m residents can travel in and out only IF allowed to do so by a health app monitored by the government. Meanwhile, residents are still advised to stay home as much as they can, and schools remain closed.
  •  Over the past few days, financial markets have been buoyed by (1) the resolute action of central banks and governments and (2) the hope that the peak is approaching (and in some European countries already reached). We think this optimism will be short-lived, as it becomes obvious that the exit journey will be long, difficult (quality of execution will be key as shown by the fiasco of the small-business loan program in the US) and marred by stops and starts. Globally, the most likely scenario is one of an unprecedented economic contraction, prolonged double-digit unemployment and widespread bankruptcies.