The Great Lockdowns imposed by countries to control the spread of COVID-19 has caused detrimental impacts on economies, according to IMF. GDP and productivity have been declining in advanced, emerging, and developing economies.
- Lockdowns and Economic Activity
- Countries that implemented more stringent lockdowns had shaper GDP contradictions
- More stringent lockdowns are associated with lower consumption, declining industry production, investments, purchasing managers’ indices for manufacturing and service sectors, retail sales, and higher unemployment rates.
Fig. Stringent lockdowns correlated with sharper economic contractions
- Lockdowns and Mobility
- Full lockdowns encompassing school and business closures, travel restrictions, and stay-at-home requirements reduce mobility by 25% in a week
- Doubling of COVID-19 cases lead to a further contraction in mobility by 2%
- Lockdown easing leads to a smaller impact on mobility than lockdown tightening
- Reduced mobility means that economies will operate below potential due to reduced economic activity
Fig 2: Impact of lockdowns on mobility
- Lockdowns and Job Postings
- Lockdowns and voluntary social distancing in response to higher infections lead to a reduction in job postings during the first 3 months of the epidemic
- Contact-intensive jobs in hospitality, personal care, and food sectors fell before stay-at-home orders as customers grew wary of infection risks.
- Easing lockdowns unlikely to generate a sharp rebound in economic activity.
Fig. Lockdown’s impact on job postings
Fig: Job postings before and after easing of stay-at-home orders
- Unequal Impacts of Lockdowns across Gender and Age Groups
- Younger workers and women disproportionately affected by lockdowns
- The effect on women 2% more than men
- Lockdowns and stay-at-home orders affect younger cohorts between 18-24 years most and weaker for those above 65 year
- Impacts on vulnerable groups could widen intergenerational inequality
- Lockdowns and COVID-19 Infections
- Lockdowns have a negative impact on infections
- Stringent lockdown leads to a reduction in cumulated infections of about 40% after 30 days
- Lockdowns should be adopted before infection rates increase too rapidly, given the lagged impact during the 14-day incubation period.
- Countries that adopted lockdowns when infections were low had considerably fewer infections during the first 3 months.
- Lockdowns pave the way to faster economic recovery as people feel more comfortable resuming normal activities after bringing infections under control.
Fig. Impact of lockdowns on infections
- Key Points
- As long as significant health risks exist, economic activity is likely to be subdued and quick rebound unlikely once lockdowns are lifted
- Policymakers should not withdraw policy supports too quickly and preserve spending on social safety
- Lockdowns have a weaker impact on mobility because people’s decisions are driven by fear of contracting the virus.
- Targeted policy interventions such as benefits to the vulnerable groups, paid leave for parents, and unemployment benefits should be used to reduce gender and intergenerational inequality.