Despite economic costs, lockdowns pave the way for faster recovery, says IMF

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The adoption of lockdown measures in several countries in the first half of this year, to try to contain the advance of covid-19, had a considerable negative impact on these economies, contributing to the recession, at a time of “dramatic contraction” in economic activity at scale global. But at the same time, these measures may pave the way for a faster recovery by reducing the volume of infections, says a report released on Thursday by the IMF (International Monetary Fund).

When analyzing data from both advanced and emerging and developing economies, the fund’s economists found that in an initial stage there was a direct correlation between stricter lockdown measures and more pronounced economic contraction.

The same occurs with actions of social distance adopted voluntarily by the population, for fear of contracting the virus, which also had a strong negative effect on these economies.

“In reality, the analysis suggests that lockdowns and voluntary social detachment had an almost comparable role,” says the IMF document.

On the other hand, suspending the lockdown and letting the virus “spread out of control” has “disastrous economic consequences”, according to the report, as voluntary social detachment in response to an increase in covid-19 cases also has serious impacts negative effects on the economy.

Thus, simply suspending the lockdown does not result in a quick recovery.

“This is especially relevant for countries that lift the lockdown prematurely, when the volume of infections is still relatively high,” warns the IMF.

“Although the relaxation of lockdown measures can lead to a partial recovery, it is likely that economic activity will remain reduced as long as there are health risks,” says the document.

Lockdown earlier

The IMF stresses that lockdown measures, especially when sufficiently restrictive and adopted early, can significantly reduce the volume of covid-19 cases. As a result, short-term economic costs would be offset by stronger growth in the medium term.

“Despite involving short-term economic costs, lockdown measures can pave the way for faster recovery by containing the spread of the virus and, over time, reducing the need for voluntary social detachment, possibly with positive overall effects on the economy,” says the report.

“This remains an important area for future research, as new data becomes available.”

In the meantime, the IMF suggests that authorities also look for alternative ways to curb the spread of the virus, with lower economic costs, such as expanding the volume of tests and tracking contacts, promoting the use of masks and encouraging people to work from home.

Global contraction

The analysis is in the second chapter of the World Economic Outlook report (“World Economic Outlook”), released in advance by the IMF. The full report will be published next week, when projections of global contraction amid the pandemic will be revealed.

To date, there are more than 36 million confirmed cases of covid-19 worldwide and more than 1 million deaths from the disease.

The United States leads in number of cases, with more than 7.7 million people infected, and in number of deaths, with more than 216 thousand deaths. Brazil is the second country in number of deaths, with more than 148 thousand deaths, and the third in number of cases, with 5 million infected.

The lockdown measures adopted since the beginning of the pandemic varied from country to country and, even within countries, from region to region, but usually include the closure of schools, bars, restaurants and several other commercial and leisure establishments.

Some countries even prevented residents from leaving their homes during certain periods, except for activities considered essential, such as going to the doctor or buying food.

All of these measures have had a devastating impact on economies around the world. “No country has been spared, with GDP dropping sharply in advanced, emerging and developing economies,” says the IMF.

Without reference to Brazil

The analysis released on Thursday focused on the measures adopted by the countries in the first half of this year, and does not specifically mention Brazil, nor does it mention the exact projections for the world GDP (Gross Domestic Product) that will be announced next week.

In its previous report on the world economy of June this year, the Fund predicted a 4.9% decline in global GDP in 2020, as a result of the pandemic’s “more negative than initially expected” impact on economic activity.

For Brazil’s GDP, the IMF projection in June was down 9.1% in 2020.

The forecast contained in the June report is more pessimistic than current projections from the market and the Brazilian government.

Last month, the Ministry of Economy maintained its projection of a 4.7% drop in Brazilian GDP this year.

In this week’s edition, the Central Bank’s Focus report, based on a weekly survey of market analysts, predicts that the retraction in the Brazilian economy will be 5.02%.

Youth and women

Faced with the possibility that economies will continue to “operate below potential as long as health risks persist, even if lockdowns are lifted”, the IMF says officials should be cautious to avoid removing support policies too soon.

The authors’ recommendation is that the authorities consider ways to protect the most vulnerable and support economic activity that are consistent with social distance.

These measures can range from promoting forms of payment without the need for contact to improving internet access, facilitating homework.

The analysis also indicates that lockdown measures most deeply affect the segments of the population that are most economically vulnerable, and warns that measures are needed to prevent an increase in inequality.

The document suggests that women are particularly affected by school closures, as the responsibility for caring for children often falls disproportionately on them, which can harm their job opportunities.

Young people also suffer a great impact, as they tend to be more economically vulnerable and have less stable jobs.

According to the IMF, as knowledge about the transmission of the virus increases, the recommendations should be reevaluated.

The document’s findings should also be re-examined as more economic indicators become available.

One area of ​​research considered crucial by the authors is to examine the effectiveness of more targeted measures instead of broad lockdowns, such as focusing on protecting the most vulnerable population or restricting agglomerations.

Source: Uol

The adoption of lockdown measures in several countries in the first half of this year, to try to contain the advance of covid-19, had a considerable negative impact on these economies, contributing to the recession, at a time of “dramatic contraction” in economic activity at scale global. But at the same time, these measures may pave the way for a faster recovery by reducing the volume of infections, says a report released on Thursday by the IMF (International Monetary Fund).

When analyzing data from both advanced and emerging and developing economies, the fund’s economists found that in an initial stage there was a direct correlation between stricter lockdown measures and more pronounced economic contraction.

The same occurs with actions of social distance adopted voluntarily by the population, for fear of contracting the virus, which also had a strong negative effect on these economies.

“In reality, the analysis suggests that lockdowns and voluntary social detachment had an almost comparable role,” says the IMF document.

On the other hand, suspending the lockdown and letting the virus “spread out of control” has “disastrous economic consequences”, according to the report, as voluntary social detachment in response to an increase in covid-19 cases also has serious impacts negative effects on the economy.

Thus, simply suspending the lockdown does not result in a quick recovery.

“This is especially relevant for countries that lift the lockdown prematurely, when the volume of infections is still relatively high,” warns the IMF.

“Although the relaxation of lockdown measures can lead to a partial recovery, it is likely that economic activity will remain reduced as long as there are health risks,” says the document.

Lockdown earlier

The IMF stresses that lockdown measures, especially when sufficiently restrictive and adopted early, can significantly reduce the volume of covid-19 cases. As a result, short-term economic costs would be offset by stronger growth in the medium term.

“Despite involving short-term economic costs, lockdown measures can pave the way for faster recovery by containing the spread of the virus and, over time, reducing the need for voluntary social detachment, possibly with positive overall effects on the economy,” says the report.

“This remains an important area for future research, as new data becomes available.”

In the meantime, the IMF suggests that authorities also look for alternative ways to curb the spread of the virus, with lower economic costs, such as expanding the volume of tests and tracking contacts, promoting the use of masks and encouraging people to work from home.

Global contraction

The analysis is in the second chapter of the World Economic Outlook report (“World Economic Outlook”), released in advance by the IMF. The full report will be published next week, when projections of global contraction amid the pandemic will be revealed.

To date, there are more than 36 million confirmed cases of covid-19 worldwide and more than 1 million deaths from the disease.

The United States leads in number of cases, with more than 7.7 million people infected, and in number of deaths, with more than 216 thousand deaths. Brazil is the second country in number of deaths, with more than 148 thousand deaths, and the third in number of cases, with 5 million infected.

The lockdown measures adopted since the beginning of the pandemic varied from country to country and, even within countries, from region to region, but usually include the closure of schools, bars, restaurants and several other commercial and leisure establishments.

Some countries even prevented residents from leaving their homes during certain periods, except for activities considered essential, such as going to the doctor or buying food.

All of these measures have had a devastating impact on economies around the world. “No country has been spared, with GDP dropping sharply in advanced, emerging and developing economies,” says the IMF.

Without reference to Brazil

The analysis released on Thursday focused on the measures adopted by the countries in the first half of this year, and does not specifically mention Brazil, nor does it mention the exact projections for the world GDP (Gross Domestic Product) that will be announced next week.

In its previous report on the world economy of June this year, the Fund predicted a 4.9% decline in global GDP in 2020, as a result of the pandemic’s “more negative than initially expected” impact on economic activity.

For Brazil’s GDP, the IMF projection in June was down 9.1% in 2020.

The forecast contained in the June report is more pessimistic than current projections from the market and the Brazilian government.

Last month, the Ministry of Economy maintained its projection of a 4.7% drop in Brazilian GDP this year.

In this week’s edition, the Central Bank’s Focus report, based on a weekly survey of market analysts, predicts that the retraction in the Brazilian economy will be 5.02%.

Youth and women

Faced with the possibility that economies will continue to “operate below potential as long as health risks persist, even if lockdowns are lifted”, the IMF says officials should be cautious to avoid removing support policies too soon.

The authors’ recommendation is that the authorities consider ways to protect the most vulnerable and support economic activity that are consistent with social distance.

These measures can range from promoting forms of payment without the need for contact to improving internet access, facilitating homework.

The analysis also indicates that lockdown measures most deeply affect the segments of the population that are most economically vulnerable, and warns that measures are needed to prevent an increase in inequality.

The document suggests that women are particularly affected by school closures, as the responsibility for caring for children often falls disproportionately on them, which can harm their job opportunities.

Young people also suffer a great impact, as they tend to be more economically vulnerable and have less stable jobs.

According to the IMF, as knowledge about the transmission of the virus increases, the recommendations should be reevaluated.

The document’s findings should also be re-examined as more economic indicators become available.

One area of ​​research considered crucial by the authors is to examine the effectiveness of more targeted measures instead of broad lockdowns, such as focusing on protecting the most vulnerable population or restricting agglomerations.

Source: Uol

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