Escaping the lockdown | Economic Monitor

09 April 2020

The developed world is now feeling the full effects of the public policy measures to control the spread of the coronavirus. Unemployment is soaring and output is plunging at rates not seen since the Great Depression. We are very much in the eye of a self-induced economic storm.

Given the damage that is being done to economies, businesses and individual livelihoods, the question of when we may see an end to the restrictions are fair. Indeed, having some visibility on a return to normality is vitally important to understanding when an economic recovery might take hold.

The international experience offers some tentative clues about what to expect:

  1. Health considerations will drive public policy
  2. Ending social distancing will take a lot longer than introducing it
  3. The recovery will vary significantly by sector


Austria this week became the first European country to set out a timetable for the gradual removal of restrictions, which could potentially be used as a template for the timing and shape of their removal elsewhere. Austria took relatively early action to restrict social interaction and has been successful in “flattening the curve” of infections. Its rate of testing is high in an international context.

Infection rates can be an imperfect way of comparing trends across countries, but they do provide the timeliest gauge of the spread of the virus. Austria was 11 days beyond and 80% down from its daily peak of new infections when this week’s announcements were made. The growth rate of infections stands at 2%, having been at 30% in mid-March. It has been successful at “flattening the curve”. This compares to current growth rates in the US of 9%, 10% in the UK and 8% in Ireland. Spain and Italy, Europe’s hotspots, have been showing progress in recent days, with growth rates slowing to 4% and 3%, respectively.  

The announcement by the Austrian chancellor Sebastian Kurz on Monday morning was not accompanied by any declaration of victory in the war against COVID-19. Instead, there was an appeal to the public to remain vigilant. He also emphasised that restrictions could be re-introduced in the future depending on the path of the virus.

Economic life in Austria will not simply return to normal, however. On 14 April, small shops and DIY stores will be allowed to open, but masks will be compulsory and strict capacity limits will be in place. On 1 May, all other stores will be allowed to open, while home-schooling will continue until at least mid-May. There will be no public events until July. Kurz noted that travel will be difficult before the crisis is resolved and a health certificate may be required.

The path laid out by the Austrians has parallels in China, which was first into the crisis and has emerged as the first one out. Restrictions there are being removed at different speeds depending on the regional experience of the virus, but overall economic activity is still well below last year’s levels. Travel into the country remains significantly impaired by the strict quarantine requirements of visitors to prevent a second wave of the virus.

This lockdown will end, but we should not expect it to be a quick reversal followed by a V-shaped. There will be a new normal. Sectors such as travel and tourism are likely to be impacted long after political leaders announce a timetable ending the restrictions - at least until a vaccine is found.

The sequence for removing the restrictions is clear from the international experience: get a handle on the virus and open the economy in a controlled fashion. Austria looks ready to make that first step next week. Ireland is still a few weeks behind, while the US trends remain the most worrying for the global economy.

Contact Us
Warning: Nothing presented on this website constitutes investment advice as it does not take into account the investment objectives, knowledge and experience or financial situation of any person. You should not act on it in any way and are advised to obtain professional advice suitable to your own individual circumstances. The value of your investment may go down as well as up. You may lose some or all of the money you invest. Past performance should not be taken as an indication or guarantee of future performance; neither should simulated performance. The value of securities may be subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities.