COVID-19: What Will the World Look Like in May (and Beyond)?

What has become very obvious over the last few months is the economic impact of the COVID-19 epidemic will largely be determined by social distancing measures taken to control the spread of the virus. Very few countries have opted for a strategy of making no efforts to contain the virus with the majority of countries either operating a “suppression” or a “mitigation” strategy.

Under a “mitigation” strategy, lockdown measures are balanced to ensure the health system is not over-run, with the measures being tightened or loosened to try to control the number of new infections while minimising the effects on the economy. Countries such as Italy, France, Spain, UK and USA may not have adopted such a strategy by choice, but were forced into it because the virus was threatening to run rampant.  Germany, Japan and Singapore appear to have adopted this approach voluntarily.

An alternative approach has been one of “suppression” where the number of new cases is reduced to very low levels by aggressive lockdowns with the thought these lockdowns, while more severe, may be shorter in duration because the number of cases can be better controlled.  Countries that have adopted this approach (successfully) are China, South Korea, Australia and New Zealand.

The question for all countries is what should be the approach going forward and once the rate of new infections have stabilised what should be done?  Firstly, for those countries operating a mitigation strategy, there is still the possibility of failure meaning the measures taken will not be sufficient and the virus will run rampant in an uncontrolled manner.  It appears USA, UK and other major European nations will be successful in their efforts to control the spread, but this may not apply to poorer and more densely populated countries in Africa and Asia (including India) so there will likely be some countries in the world where the virus runs rampant.  Secondly, other countries pursuing a mitigation strategy may decide to continue with it, relying on improvements in treatments and greater understanding of how the virus spreads to loosen the restrictions causing the most economic detriment without having new cases run beyond numbers with which their health care systems can cope.  Thirdly, there will be those countries that pursue a suppression strategy to its natural conclusion which is eradication of the virus domestically at which time their economies can in theory be totally opened up domestically so long as borders remain closed to prevent new infections entering the country. The striking thing about all three strategies above will be that national borders will likely remain either completely or largely closed until a vaccine is developed because any country with a low level of infection will not wish to import cases from elsewhere.

Amicus expects to see a situation develop in Australia where there continues to be very severe international travel restrictions. During this period, the government will decide whether we continue to pursue our very successful suppression strategy either to the point of attempted eradication of the virus (which has been the announced policy in New Zealand) or we move to a mitigation strategy and simply try to keep new cases at a target level until a vaccine is developed. It is unclear what that target level will be, but it is unlikely to be a very large numbers as public opinion would not wish the infection rate (and by implication death rate) to be increased markedly beyond the 50 to 100 new cases per day currently.

For other countries where the virus has not run rampant and which are currently operating mitigation strategies, a choice needs to be made as to the target level of new cases that can be tolerated.  It is unknown whether the European countries will continue to drive new cases down below 3,000 a day to the levels of less than 100 per day seen in South Korea, Australia, China and New Zealand or whether they will continue to operate at these higher numbers finding a different point of trade-off between the health and economic impacts.

It is highly likely Australia will continue to observe what is working and not working in other countries where the spread of the virus is more advanced and will try to cherry pick the best policies and approaches to lessen the economic impacts while keeping deaths to a minimal level each week, unless the government opts for the eradication strategy chosen by New Zealand. At this point both options are open and are no doubt being considered.

Australia is fortunate in that it has options which are not open to other countries that do not have the same resources or are running at far larger daily case numbers and therefore Amicus believes we are in a far better position economically because of our greater range of strategic options. If the effects on our economy of present restrictions are deemed too crippling we have the option of loosening them and accepting a higher death rate. However, Amicus would judge the strategy adopted will be one of a very slow loosening of restrictions such that the death rate does not rise and the negative health effects of reductions in social distancing can be offset by the positive effects of better ongoing testing and contact tracing. In addition there should also be benefits derived from improved behaviours as the population gets accustomed to better social distancing, frequent hand-washing and sanitising, etc which may also allow the size of gatherings to be increased beyond the current level of two particularly for business purposes.

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