8 April 2020

COVID-19’ Epidemiologic and Economic Impact

Analysed in just a few gobbets for time-starved, over-solicited decision-makers

◼ We are bombarded daily with a relentless stream of data, but four months after the beginning of the
outbreak, we still know very little. The ratio undetected / confirmed cases, the fatality rate, the rate of
transmissions from asymptomatic individuals, the seasonality effect, the length of the incubation period,
the national infection rates: all these and many others remain ‘known unknowns’. This makes it
virtually impossible to come up with the right public health strategy: in Spain for example, estimates for
the number of people infected range from 1.8 million to 19 million.

◼ It follows that numbers are (almost) meaningless everywhere. Even the numbers of deaths caused
by Covid-19 are questionable. Italian authorities recognise that the death toll is far higher than reported
(many die uncounted as the over-stretched health-care system struggles to save the living) while in the
UK the ONS (Office for National Statistics) says the figures could be almost 80% higher than initially
reported. Meanwhile, there is growing scepticism about Chinese numbers - also true for Iran,
Russia, Indonesia, North Korea, and probably for Saudi Arabia and Egypt.

◼ The issue of “exit strategies” is very high on the political agenda. It will be fiendishly complex,
resembling more a “progressive opening strategy” with slow and phased returns to work in some
industries (retail, construction, etc.) Combined with continuing restrictions in others (hospitality, physical
entertainment, events, etc.). Most likely, restrictions will be re-imposed here and there until a vaccine is
widely available (in the Spring of 2021 at the earliest). Mass community testing, combined with contact
tracing, will be a critical component of any exit strategy.

◼ When might a return to some semblance of normalcy take place in Europe and the US? Different
estimates suggest in most Western countries it could take about a month between the initial
lockdown and the peak (an important epidemiological and psychological threshold). Then, it will be
another few weeks before the lockdowns can be lifted (Wuhan was sealed from January 23rd to April
8th: two months and a half). For the US, this means late May or early June. Europe is further down the
pandemic road – and significantly so for some countries like Denmark, Austria, Norway and Italy.

◼ China is not a good proxy for the rest of the world, but the example of Wuhan is illustrative of the
bumpy road ahead globally. The city where the virus originated is emerging today from its 2.5 months
of lockdown. But its 11 m residents can travel in and out only IF allowed to do so by a health app
monitored by the government. Meanwhile, residents are still advised to stay home as much as they can,
and schools remain closed.

◼ Over the past few days, financial markets have been buoyed by (1) the resolute action of central banks
and governments and (2) the hope that the peak is approaching (and in some European countries
already reached). We think this optimism will be short-lived, as it becomes obvious that the exit journey
will be long, difficult (quality of execution will be key as shown by the fiasco of the small-business loan
program in the US) and marred by stops and starts. Globally, the most likely scenario is one of an
unprecedented economic contraction, prolonged double-digit unemployment and widespread
bankruptcies.