A second imposition of lockdowns to counter the resurgent Covid-19 pandemic would wreak havoc on the global economy, which is already dealing with an unprecedented crisis.
Despite the eventual retreat of the life-threatening virus across Europe, Asia, and parts of the USA, there’s a common consensus that a second wave would create a crushing impact.
However, it’s widely acknowledged that with the end of the first wave, the worst of the pandemic is finally over. But the fear of uncertainty and the massive economic setback across the world still looms large.
Before we further discuss the situation, here’s a little information about the dreaded second wave.
What’s a second wave?
Well, firstly, it’s not a scientific term with well-defined parameters. In a more generic sense, it’s used to refer to a subsequent, sharp increase in cases that occur after the original outbreak has been dealt with, in a given area.
Pandemics are spawned by new pathogens that affect the vast majority of people who do not have immunity to combat the symptoms. This phenomenon itself allows them to engender global outbreaks.
In such cases, what often happens is that a novel variant of flu virus rapidly spreads and then recedes, similar to a tsunami. However, a few months later, it hits back and spreads around large parts of the world.
Even though certain nations have recently come up with vaccine prototypes, scientists are still in the testing stage. And hence, they are yet to learn more from their findings to develop a commercially viable option.
Thus, rapid testing, isolating, social distancing, and contact-tracing continue to remain the most effective methods to prevent a cluster from manifesting into a wave.
What are the possible impacts on the economy?
With the reopening of the US economy and the labor market bouncing back, finance experts and economists worldwide see a possible ray of hope. Nevertheless, the likelihood of a second outbreak, either because of lockdown relaxations or the forthcoming colder season, has opened up a can of worms for world leaders.
What has been the sharpest economic setback since the Great Depression almost a century ago, has led to scrambling predictions among world forums and national governments alike. The uncertain trajectory of the novel coronavirus is impeding companies and governments to invest and grow.
The Organization for Economic Cooperation and Development (OECD) recently stated that a second wave of COVID-19 would drop global GDP by more than 7.5%. And approximately 40 million more people would lose their jobs.
Even without a second wave, the OECD estimated a 6% decline in global GDP this year alone. The organization’s chief economist, Laurence Boone, opined that a second wave would continue to impact the world economy till 2021.
He further added that massive uncertainty around the situation would foster long-lasting economic damage, perpetuated by consumer behavior, and trade tensions.
While OECD’s predictions seem grim indeed, they are not the only ones sounding the alarm.
A panel of 48 economists from the National Association of Business Economists (NABE) in the US, forecast a 5.8% GDP drop by 2020. Shockingly, that’s the steepest decline since the 1940s, and this second-quarter drop will still be 5.6% lower than the same time in 2019.
Revisions of the first quarter GDP revealed that the US economy shrank by 5% between January and March.
And since America’s economy is heavily dependent on consumer spending, which is expected to plummet by 6.4% this year, the aftershocks will most likely linger until 2021.
At the opposite end, a large number of professionals believe that the development of a vaccine, proper distribution of protection kits, and continued distancing practices are the way forward.
Before the pandemic, several major economies, including Germany, Italy, and Japan, were ill-equipped to handle minor external shocks. Therefore, it’s not a surprise that the pandemic has left the world reeling in the wake of recession and mass deaths.
And a second wave is only expected to make things worse.
For now, at least in Europe and large parts of the USA, the idea of COVID-19 resurfacing seems increasingly remote, as more and more people resume their pre-pandemic lives.
However, Soumya Swaminathan, the World Health Organization’s chief scientist, says that a second wave is still a real risk, as countries reopen public spaces and end lockdown practices.