According To This Study, Gradual Easing Of Lockdowns Will Be Beneficial To Global Economy

If a recent study is anything to go by, a careful approach in easing lockdown restrictions could well be a good thing for the global supply chain in the long run.

According to ANI, the study was led researchers at the UCL and Tsinghua University and was published in the journal Nature Human Behaviour. It is the first peer-reviewed study to analyse the potential global supply chain effects of COVID-19 lockdowns and how the impact has been on 140 countries, even for countries that weren't directly affected by the novel pandemic.

The study came to the conclusion that stricter lockdowns imposed earlier--like the two-month-long lockdown period in China--will work out better than moderate lockdowns for a longer period of time, for example, four to six months.

AFP

Economies apparently get affected by the duration of the lockdowns not the severity. This happens because businesses can take in the impact of a short lockdown by depending on their back-up options and also since shorter lockdowns cause less disruption regionally as well as globally.

Researchers also found that countries that were not directly affected by COVID-19 will also experience significant losses of more than 20% of their GDP due to falls in consumer demand.

Caribbean countries that rely on tourism and Asian countries like Kazakshtan which depend on energy exports will also suffer the brunt of it.

Also vulnerable are globalised industries that rely on difficult-to-replace suppliers, such as automobile manufacturing, where production is estimated to fall by up to half.

AP

Lead author Professor Dabo Guan (UCL Bartlett School of Construction & Project Management and Tsinghua University) said, "Our study shows the ripple effects caused by lockdowns along global supply chains, with countries not directly affected by Covid-19 still experiencing heavy economic losses."

"While predicting the true cost of lockdowns is not possible at this stage, our research suggests that shorter, stricter lockdowns minimise the impact on supply chains, while gradually easing restrictions over the course of a year may also be less disruptive than a swift lifting of restrictions followed by another lockdown."

It has been estimated by the researchers that the lockdown measures need to be gradually eased over a period of 12 months which would minimise supply chain impacts as compared to lifting the restrictions quickly and then bringing in another set of lockdown later.

Co-author Professor Steven Davis (University of California, Irvine) said, "Our analysis quantifies the global economic benefits of robust public health responses and suggests that economic justifications to re-open businesses could backfire if they result in another round of lockdowns."

WSJ

Professor Guan added, "Companies will survive the supply chain failures that lockdowns cause by relying on reserves of stock or finding new suppliers. If a second shock hits, reserves may be low and supply chains only recently repaired - making a new break much more costly."

The study's highlight factor which affects the global economic cost of lockdowns is the number of countries that are implementing them and also highlighting the importance to the global economy of one country containing an epidemic.

Co-author Professor D'Maris Coffman (UCL Bartlett School of Construction & Project Management) said, "Just as individuals staying at home protect others as well as themselves, so countries imposing strict lockdowns provide a public good to other countries.

"In preparing for the next pandemic, a global facility, in all likelihood administered by the IMF, could ensure that the costs of containing an outbreak are not borne by one country alone. This would remove some of the disincentives to early action and provide enormous health and economic benefits over the long term."

University of Auckland

Researchers replicated three kinds of lockdown -- strict lockdown which causes 80% of travel and labour to cease, a moderate lockdown with a 60% reduction and a third lighter lockdown which brought in a 40% reduction in travel and labour.