Second Lockdown

One enduring lesson from the COVID-19 pandemic is that any lasting economic recovery will depend on resolving the health crisis.

The research from IMF in the latest World Economic Outlook shows that government lockdowns—while succeeding in their intended goal of lowering infections—contributed considerably to the recession and had disproportional effects on vulnerable groups, such as women and young people. But the recession was also largely driven by people voluntarily refraining from social interactions as they feared contracting the virus. Therefore, lifting lockdowns is unlikely to lead to a decisive and sustained economic boost if infections are still elevated, as voluntary social distancing will likely persist.

Yet the analysis finds that a balance can be achieved in protecting public health while preventing a protracted economic decline. Lockdowns impose short-term costs but may lead to a faster economic recovery as they lower infections and thus the extent of voluntary social distancing. Examining the medium-term effects of lockdowns as well as the robustness of our findings is an important area for future research as the pandemic evolves and more data become available.

Source: IMF