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News Article

The Challenge of Reviving the Economy Post-Quarantine

By Alessa Flores | Tue, 04/07/2020 - 13:09

Today, Deputy Minister of Health, Hugo López Gatell, was consulted by the media on why Mexico should restart its activities after the quarantine on April 30, if they reported that the peak of coronavirus contagion in the country will be in May? López Gatell answered that quarantine fulfills the purpose of protecting the people's safety and preventing an overload at hospitals. However, it cannot be prolonged for too long because it could have significant effects on public life and essential activities like food production. 

Quarantine plays a primary role in the management of the outbreak. According to the World Economic Forum, placing people in quarantine reduces social interaction in order to minimize the risk of transmission of the virus, helping to avoid a massive increase in cases that could overwhelm health services. 

The clear example is China, which saw a major increase in the cases of COVID-19 in the province of Hubei, putting on quarantine nearly 60 million people and limited operations at factories, offices, schools, public transport and other aspects of everyday life. According to the Hubei Province Health Commission and the CGTN media organization, the result was a drastic reduction in the spread of the disease. One month after the social-distancing measures took effect, the number of new cases decreased from more than 1,600 every day to just 36.

After flattening the contagion curve and effectively completing the quarantine, the logical question is thinking about how not only to gradually return to everyday life but also how to reactivate the economy. Despite their differences, most countries agree that exceptional policies are required for exceptional times. 

Euler Hermes analyzed there are three factors that countries need to take care of to prevent economic recovery from going wrong: corporate stress, liquidity and policy mistakes. In addition, the firm advised that countries must always be conscious of downside risks, rapid downturns in stocks and financial markets and other factors that could lead to liquidity stress and credit events that are key vulnerabilities of the global economy and that could lead to a similar situation to what occurred in the 2008-2009 crisis.

Economic recovery is projected to be slower for those countries most impacted by COVID-19, such as the US and certain countries in Europe, such as Italy and Spain. The effects of the COVID-19 crisis for these affected countries is estimated to finish until 2023, according to a recent consultancy report by McKinsey & Company. While in emerging markets such as Mexico and Latin America, recovery is expected to be slower and will require international aid from financial institutions such as the World Bank or the International Monetary Fund, according to the International Monetary Fund.

It will be a challenge for the authorities to take care of the sick and the efforts will put a strain on health services, infrastructure and human resources. On the other hand, it will make people who lead unhealthful lifestyles reflect, since according to WHO, people with obesity, diabetes and other diseases are 95 percent more likely to have COVID-19 complications that end up in death. Meanwhile, the impact of the crisis and the government's attempt to reactivate the economy will face the effects of capitalism, climate change, globalization and the growing economic forces that were shaken during the crisis, according to David Harvey.
 

The data used in this article was sourced from:  
Ministry of Health, CGTN, Hubei Province Health Commission, World Economic Forum, Euler Hermes, David Harvey, IMF
Photo by:   by Geralt
Alessa Flores Alessa Flores Senior Journalist and Industry Analyst