The COVID-19 Economy
This Week: Economic priorities and second waves of infection

Published on May 11, 2020 by Wojciech Gryc

Countries are easing lockdowns and opening their economies. The next two weeks will be indicative of what we might expect with regards to second or third waves of infection, as well as the political and economic responses to those waves.

So far, the initial reports show we're likely to see an increase in COVID-19 infections.

• Germany is seeing a spike in infections after opening shops and playgrounds.
• South Korea is seeing the same, with cases linked to social venues like night clubs and bars.
• Nigeria saw a spike last week as it eased social isolation measures.
• There's even a cluster of new cases in Wuhan.
• Early this week, Australia, France, and Russia will be easing restrictions.

It's important to remember why we went into lockdown. It wasn't to stop the virus from spreading, but to flatten the curve of infections... To spread infections out and avoid overwhelming our healthcare systems.

This is particularly important to keep in mind given the economic toll of the virus.

This concern around balancing the economy with infections is resurfacing as a calmer, more nuanced narrative from what we've observed a few weeks ago.

• Treasury Secretary Mnuchin is encouraging states to reopen to avoid 'permanent' economic damage. Note the very deliberate use of the word.
• Factories are threatening to close permanently as lockdown policies continue.
• The recovery observed in the stock market might be limited to digital firms, given their size as a portion of the indices most investment analysts track. COVID-19's impact on non-digital firms is clearly disastrous and not aligned with the stock prices of digital firms.
• The same economic narrative is appearing around the world. For example, in Pakistan and Vietnam.

Second waves of COVID-19 infections will test policymakers' abilities to make difficult and strategic decisions.

• As the economic issues tied to the pandemic draw out, some of the temporary economic effects will become permanent.
• This will put significant pressure on economies to reopen or stay open despite infections.

With that in mind, here's what I'm analyzing this coming week...

• Given lockdown policies being loosened, do viral infections spike?
• If they do, how do policymakers react? It's important to observe the subtle wording around permanent economic damage and inability to sustain permanent closures.
• This will help clarify if lockdown procedures return, or if economies remain open at the risk of larger spikes of infections.