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WASHINGTON, United States – Business closures amid the coronavirus pandemic imposed an economic cost, but removing restrictions is no guarantee of a speedy recovery unless the virus is defeated, the IMF said on Thursday.
Voluntary social distancing played almost as much a role in the economic impact of Covid-19 as enforced restrictions, the IMF said in its World Economic Outlook (WEO) chapter on the effects of the lockdown.
Using mobility data from Google and Vodafone, the report found that voluntary social distancing made a “significant contribution” to the recession, which “should caution against the expectation of a rapid economic rebound once the locks are lifted.”
“This is especially relevant for countries lifting locks prematurely, when infections are still relatively high,” the IMF said.
Despite the short-term economic costs, lockdowns can lead to a faster economic recovery by containing the virus and reducing voluntary social distancing, according to research.
But the IMF dismissed the debate as a simple trade-off between lives and livelihoods, as rising infection rates also affect the economy, making people less willing to venture out.
“By controlling infections, lockdowns can pave the way to a faster economic recovery as people become more comfortable resuming normal activities,” the report said.
The Washington-based crisis lender projected a global recession of nearly five percent this year in June, but IMF chief Kristalina Georgieva said this week that new data shows the situation is “less severe,” though it’s certainly not rosy.
The IMF is due to release updated WEO forecasts on Tuesday.
The report showed that strict closures at the start of the pandemic were more effective in containing the spread of the disease and could be lifted earlier, compared to restrictions imposed after the level of cases increased.
But the authors caution that “as long as significant health risks persist, economic activity is likely to remain subdued.”
They repeated Georgieva’s call on officials to resist the urge to withdraw political support too quickly and should instead “preserve spending on social safety nets.”
That said, governments must implement measures that support economic activity while continuing social distancing, including work-from-home programs.
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