Countries Begin to Ease Lockdown Measures, but the Outlook for Re-Starting Economic Output is Mixed

Countries Begin to Ease Lockdown Measures, but the Outlook for Re-Starting Economic Output is Mixed

Published: May 8th, 2020

Italy, Spain, and the United States began easing lockdown restrictions this week, looking to breath life back into economies that had been put partially on hold by the COVID-19 pandemic. Economists and health experts, however, warned against moving too fast as the death toll from coronavirus approached 250,000 globally.

Italy, the original epicentre of Europe’s outbreak and one of the hardest-hit countries, began relaxing its two-month lockdown, allowing 4.5 million people to go back to work. Construction sites have been allowed to reopen while families go back to their previous visitation routines.

In the US, which has logged the highest number of infections and deaths of any country – including China – many states like Georgia and Ohio were taking steps to ease commercial restrictions and let more businesses reopen to the public.

Roughly half the states in the country reopened their economies in what has become a highly charged political issue. President Trump has been accused of not having a firm hand on the crisis, as he warned Americans that the national death toll – exceeding 68,000 and more deaths than the country experienced during the Vietnam war – could reach up to 100,000.

“We can’t allow the country to stay closed,” Trump told journalists. “We won’t have a country left.”

Switzerland, Belgium, India, Portugal, and Malaysia also began lifting some restrictions, with some reopening public parks, factories, libraries, construction sites, and hairdressers.

The moves to reopen economies came as the rate of new coronavirus cases globally seemed to settle into a range of two to three per cent, down from a peak of more than 12 per cent seen in mid-March.

A Reuters analysis based on government data shows that known cases of infection have risen beyond 3.5 million, but many health experts question the numbers. As many cases manifest only light symptoms, and not everyone with symptoms is tested. Most countries still only record hospital deaths, despite calls to include care home figures, as well as the number of excess deaths registered in each country.

Medical researchers are sceptical about official numbers, and worry a second or a third wave of infections could kick-off if economies are reopened too rapidly.

Re-heating the trade war with China

While the public has usually accepted tough measures to slow down the outbreak, government trade ministries are getting nervous the economic toll.

PMI data in April showed factory output had been savaged across the globe, with a bleak forward outlook as lockdown measures slashed global production and killed-off demand. This year the global economy is expected to suffer its worst contraction ever, potentially exceeding numbers not seen since the Great Depression of the 1930s.

Tensions between the US and China over the origin of the pandemic have also begun to escalate, pushing down oil prices and stock markets as investors became fearful of a renewed trade war.

American Secretary of State Mike Pompeo added fuel to the fire over the weekend when he announced the US had ‘significant evidence’ that the virus could be traced back to a laboratory in the Chinese city of Wuhan – where the global outbreak began. He did not share the evidence or question an earlier assessment by US intelligence that the virus was not human-made.

An editorial in China’s Global Times, an official organ of the ruling Communist Party, said Pompeo was ‘bluffing’ and called on Washington to make any evidence it had public.

White House officials were already discussing the possibility of restoring tariffs on Chinese goods and services to make the country pay for its supposed role in causing the coronavirus outbreak. A sabre-rattling Trump told journalists at the weekend that he was looking at renewing tariffs in China as punishment, and threatened to step back from the miniature trade agreement that seemed to cool the burgeoning trade war between the two countries.

Despite the worries around China and signals red-flagging the US’s own faltering economy, forex traders still seemed to favour the greenback this week as a relative safe haven amid global uncertainty.

The dollar reached two-week highs on Thursday, even after another report revealed millions more Americans had applied for unemployment benefits the previous week. The dollar also hit a two-week peak versus the euro and closed in on a seven-week high against the yen.

Pandemic II could erupt at any time

In Italy, where COVID-19 has killed close to 30,000 people, Prime Minister Giuseppe Conte said the country was still ‘fully in the grip of the pandemic’.

Most shops are still under orders to stay shut until 18 May, while enclosed gathering spaces like cinemas, schools, and theatres remain closed indefinitely. Friends are still barred from casual get-togethers.

In America, former Food and Drug Administration commissioner Scott Gottlieb told reporters on the Face The Nation programme that the United States was recording a “mixed bag” from its efforts to stop the spread of the virus, with about 20 states even seeing the number of new cases rise.

Hairdressers, hardware stores and other stores began to open as Spain initiated its own multi-phase plan to re-start its economy. Workers distributed masks at Madrid subway stations, which are now compulsory on pubic transport.

Adjusting to a new normal

Rome’s current affairs programmes noted an increase in morning commuting this week. However, traffic was lighter than before the virus and journalists said those on the streets looked to be following government advice on social distancing.

The tentative 'reopening' is taking on many forms. In the US state of Ohio, workers in construction and manufacturing must wear medical facemasks and remain at least six feet/one metre apart.

In Lebanon, restaurants started to open their doors, but with fewer tables and chairs to avoid falling afoul of government rules to max out at 30 per cent of their normal licensed capacity.

Iran planned to reopen mosques in over 130 cities. The country’s news agency said worshippers would be restricted to 30-minute visits, have to practice social distancing, and wear gloves and masks. The country has reported more than 6,000 deaths since the pandemic first took hold in February.

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