When a mystery virus was reported to have surfaced in Wuhan, many in the Western world dismissed it as a faraway irrelevance, with discussions regarding measures to prevent it spreading or reaching their nations being seen at best as premature and at worst as scare-mongering.
When lockdown was finally announced, collective misguided hopes that a couple of weeks of working from home would eradicate the virus were soon crushed as lockdown rolled on and on.
It was unsurprising that the financial impact experienced by countries across the globe has been colossal: workers removed from the workforce because of illness or isolation reduced the labour supply and harmed productivity, while mass job losses in many sectors decimated the amount of money being spent in the economy, with the International Labour Organisation (ILO) estimating that global labour income has decreased by 10.7% in the first three quarters of 2020, compared to the same period last year.
Workers earning less equals less spending in the economy, prompting governments to stimulate spending, such as the much-derided “Eat Out to Help Out” programme. The end of 2020, and the beginning of a new year, seems like a fitting time to reflect on how different countries have been, or are being, impacted financially by the pandemic.
While there’s a strong correlation between the types of financial and economic difficulty faced by different countries, the severity seems to vary considerably. When policy-makers have defended the consequences of their decisions, or critics have attacked such decisions, one popular line of argument has been that of the trade-off between minimising health impacts and retaining a healthy economy – the narrative is that you can’t have both, and one has to be sacrificed for the other.
While there’s a strong correlation between the types of financial and economic difficulty faced by different countries, the severity seems to vary considerably
The opposite couldn’t be more true. According to data collected by Our World in Data, charting economic decline in the second quarter of 2020 and comparing it to the same period in 2019, among the worst hit countries are Peru, with a decline of -30.2%, and Spain and the UK with declines of -22.1% and -21.7% respectively. Taiwan has pulled through the period with -0.6% decline. This shows that the countries with the lowest decreases in GDP are also those with the lowest COVID-19 death rates, showing that health and the economy can go hand-in-hand. Other factors are also at play, such as population density, testing capacity, and population demographics.
Italy entered the pandemic financially unhealthy, and Covid-19 worsened an already bad situation. Pre-pandemic, public debt stood at 134.8% of GDP, and unemployment was at 9%, both legacies of the 2008 crisis and the eurozone crises of 2010 to 2012. Workers and business owners relying on tourists with cash to spend have been hit hard, sinking the Italian economy further into debt, with the Council of Europe Development Bank (CEB) loaning the government €300 million to finance health expenditure within the country’s National Health Service.
A high degree of uncertainty doesn’t help countries like Italy or Spain, either. Lower death rates and relaxing of restrictions across Europe towards the end of summer gave us a tantalising glimpse of what life in a post-covid world could look like: while we were hesitant to look too far into the future, it felt like the end was nearing.
Then, the second wave hit, and, even with a vaccine, what lies ahead is hazy. While it’s true that there will always be a degree of uncertainty when investing, the pandemic is an unwelcome spanner in the works of governments, firms, individuals, and the global financial market as a whole.
Taiwan has managed to weather the unrelenting storm that is the Covid-19 pandemic successfully, luring Taiwanese people home to experience a relatively normal life. Consumption has increased, and restaurants and hotels are full. Tax relief measures and stimulus programmes have supported individuals as well as revitalising the economy, and a strong electronics industry has experienced increasing demand for goods.
New Zealand, meanwhile, is making the rest of the world jealous with Social Media photos of large, maskless crowds celebrating the new year, their pay-off for a coherent and targeted disease strategy. Although stringent lockdown rules resulted in their worst recession since 1987, with cases currently remaining low, it is likely that the country will recover at a faster rate than other nations.
Hindsight is a wonderful thing – but differences in experiences across the world are too severe to ignore
The pandemic has caused difficulties for countries around the world, all unique in their situation and outlook. While it is difficult to compare country responses without taking other factors into account, it’s imperative that policy makers take note of how events have unfolded across the world to inform future decisions, to ensure that lessons are learned: future analysis will lay bare what worked and what didn’t. Hindsight is a wonderful thing – but differences in experiences across the world are too severe to ignore.