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IMF: Covid-19 effect is "worse" than financial crisis 5:34
(CNN Business) - How to revive an economy that has been suspended by a pandemic? The answer is: very, very carefully.
Even at a time when the new coronavirus continues to spread around the world, European governments are already beginning to think about how to reopen factories, offices and schools while minimizing the possibility of new outbreaks. On Monday, Austria said it would gradually reopen the warehouses after Easter, making it the first country in Europe to do so.
- READ: Much worse than the financial crisis, the economic effect of the covid-19
Pressure is mounting on governments to explain what the plans are due to rising economic costs of measures designed to contain the coronavirus. There are also fears that food supplies and health care provisions may be affected if the restrictions remain in place for too long.
While confinement measures are likely to last for weeks - and in some countries even months - detailed planning now done could protect vulnerable people and help economies recover more quickly when restrictions are eased. Now doing it wrong could lead to more outbreaks, another round of restrictions on work and public life, and much more economic pain.
In Germany, where 101,000 people have tested positive for coronavirus and more than 1,600 have died, a group of economists, lawyers and medical experts recommend a gradual recovery of Europe's largest economy that would allow specific industries and workers to resume their activities while take steps to prevent a resurgence of the coronavirus.
A dozen academics wrote in the report, published last week by the Ifo Institute for Economic Research, that they do not expect an effective coronavirus vaccine or treatment before 2021. As a result, Germany should tackle the fight against the disease. "More like a marathon and less like a speeding race."
Will the economy recover after the coronavirus? 1:47"Future measures must be designed and prepared in such a way that, on the one hand, they guarantee good medical care and, on the other hand, they can be maintained for the necessary periods of time," said the experts. "Planning for this transition must begin immediately in politics, administration, business and other organizations," they added.
Germany has ordered the closure of schools, restaurants, playgrounds, sports facilities and most stores until at least April 20, pushing an economy that was already on the brink of recession into a deep depression. Government spokesman Steffen Seibert said Monday that he still cannot provide a definitive deadline to lift the restrictions. Ifo has forecast a 20% impact on GDP this year if the blockade lasts for three months.
How to restart an economy
The German government is already implementing an economic bailout package of up to 750 billion euros ($ 825 billion) that includes measures to stimulate loans to companies, take equity stakes in companies and support workers on licenses. The package is among the largest launched anywhere in the world.
The Ifo report suggests that the country should now create a national working group of experts and public representatives that would make recommendations on how to ease restrictions on work and public life, and when industries should restart production. Returning to work would be voluntary for employees.
A man in a mask walking on an empty street during the coronavirus crisis in Berlin, Germany. (Credit: Maja Hitij / Getty Images)
Industries like telecommunications and automotive production that add the most value to the economy should take priority, according to the report, while work that can be easily done from home must continue remotely. Daycares and schools would open relatively quickly, because youth rarely have severe symptoms and parents cannot work if child care facilities and schools remain closed.
No nightclubs or big events
Companies that make health products or components should also reopen quickly, while hotels and restaurants would only be allowed to do so in a "very careful and controlled manner" because it is difficult for people to keep their distance in such establishments. Nightclubs and clubs should be closed for now, according to the report, and events with a large crowd should not take place.
Experts say different measures may be in place in different regions. The restrictions could first be relaxed in places with low infection rates or with a reduced risk of transmission, such as rural communities. As time passes, regions where the population has built up a certain degree of immunity may operate with fewer restrictions.
- READ: How to stop the spread of disease in planes and ships after the coronavirus pandemic?
That, of course, requires large-scale, coordinated testing for the coronavirus. Comprehensive training in proper hygiene and new rules that require the use of personal protective equipment would also be necessary.
Experts also recommend that Germany organize a "massive" increase in the production of protective clothing and masks, increase its production capacity for drugs and vaccines and establish an information technology platform that enables strategic planning.
And while the task force would make recommendations, politicians and business leaders would make the final decision on when to lift the restrictions. "The attempt to centrally control the resumption of production ... would not work in practice. This resumption must be controlled mainly by the institutions and companies themselves, ”the report clarified.
Looking at China
Countries trying to boost their economies while preventing a second wave of coronavirus infections can search China for clues to what works and what doesn't.
The country likely suffered its first economic contraction in decades during the first quarter of the year, after the Beijing central government imposed drastic measures to contain the spread of the coronavirus.
China has embarked on an aggressive plan to save its economy, launching policies and campaigns aimed at incentivizing people to return to work, encouraging business confidence and protecting as many companies as possible. Beijing is spending billions of dollars on medical supplies and treatments, while injecting money into infrastructure projects to create jobs. It has also removed roadblocks and allowed people to travel more freely in areas where the virus appears to have run its course.
But it is too early to evaluate the results. New questions are emerging as to whether the infection data reported by Beijing can be trusted, and large numbers of people have been seen flocking to tourist sites over the weekend. Some companies were quick to get back to work too soon, complicating recovery efforts. A major titanium producer restarted its factories in February, only to stop work again because the workers were infected.
The need for balance
Dr. Anthony Fauci, America's leading infectious disease expert, recently said that while public health is his top priority, keeping society and the economy in total confinement for too long would have unintended negative consequences.
And former British Prime Minister Tony Blair told the BBC on Monday that he was "terrified" of the economic damage that confinement measures were causing to the UK economy, estimated by the Center for Economic and Commercial Research at 2.9 billion dollars per day.
- READ: The US economy lost 701,000 jobs in March, the worst report since 2009
"If it continues for a long period ... it also affects the ability to operate the health care system effectively," Blair said.
Fauci said how to strike the right balance is an issue that countries around the world are considering as the coronavirus continues to spread.
"People depend on supply chains for nutrition, for food," he told The New York Times. "They can starve. People have diseases. If you dramatically interrupt that to the point where it no longer exists, the disruption of society can be really catastrophic, "he said.
"We need to make sure we keep our attention balanced," he added.
Laura He and Stephanie Halasz contributed to this report.
Confinement Economic Measures
