What is the role of the timing of public health restrictions?Īlthough almost all major economies implemented restrictions on activity to help prevent the spread of Covid-19, there was variation in terms of both speed – how soon restrictions were implemented – and duration – how long they were kept in place before being relaxed. Measurement: countries define and measure ‘economic activity’ in slightly different ways.Pre-Covid-19 growth: countries varied in their expected GDP growth rates for 2020.Timing: countries differed in the timing (and severity) of the public health restrictions that they implemented.
Just how informative are international comparisons of GDP when assessing the economic costs of Covid-19? There are (at least) three difficulties that need to be borne in mind when comparing its cross-country economic impact using GDP data: Figure 1: International comparison of GDP growth rates in 2020Īre there reasons to be cautious about international GDP comparisons? By simply comparing growth rates, the UK appears clearly to be among the worst affected countries, with the initial decline in activity almost twice as large as those suffered by Germany and the United States. The next largest single-quarter decline in national GDP was recorded in Spain, where GDP fell by 17.8% (also in the second quarter). (Quarterly data adjusted for inflation go back to the Second World War, but even the data unadjusted for inflation back to 1920 have never seen a bigger decline in a single quarter). In the second quarter of 2020, UK GDP fell by 20.4%, the largest measured fall in GDP across major economies and by some distance the largest drop ever recorded. The chart makes for grim reading for the UK. Figure 1 presents growth rates of GDP in both the first quarter of 2020 (January to March) and the second quarter (April to June) for the UK and several other advanced economies. The most common way to compare countries is to look at GDP.
This raises important questions: can we make sensible comparisons of the economic cost of lockdown across countries and what should we keep in mind when drawing such international comparisons? How has the economic impact of Covid-19 varied across countries? Yet there is a surprising amount of variation in the economic impact of coronavirus across different countries. The experience of lockdown and fear is common in almost all economies affected by the pandemic. As a result, this year has seen a decline in UK economic activity that is historically unprecedented in terms of both its depth and speed. This was due either to public policy measures (national lockdowns) or to the fear of infection, which led to a widespread voluntary withdrawal from social settings in the UK even before lockdown began. In the first half of 2020, previously normal activities became impossible almost overnight.
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