Economic impact of virus still to be seen
- The experiences of faraway New Zealand show that success is fleeting against a disease that is still not completely understood
More than a year after the emergence of Covid-19, uncertainty remains about whether life will be the same after the pandemic and about the resilience of consumer sentiment. Will things return to “normal”, or will there be a new normal? Will the recent memory of lockdowns and economic disruption prompt consumers to save more for another rainy day? Or will they spend as if there is no tomorrow and help stimulate economic recovery?
The answers to these questions are unlikely to be known until long after vaccines have made a real difference. But economists naturally would like answers now.
Consumer sentiment means everything. The best hope of a clue lay in New Zealand. Until now, it had not reported community transmission of infection for six months, thanks to a rigorous border closure and quarantine regime that totally excluded non-citizens and non-residents, and a three-week lockdown of Auckland in August. It is also 1,600km by sea to the nearest land.
As a result, New Zealand has been the envy of most of the world, with the economy bouncing back from recession and unmasked large crowds enjoying sporting and cultural events.
Also its economy has, in a sense, been leading the way into uncharted territory of consumer sentiment, where personal spending might reflect either uncertainty or confidence about the future. If a housing boom is any guide, the signs were positive.
At least that was until earlier this month, when three cases of the highly contagious UK variant of the coronavirus in one family prompted the government to order a three-day lockdown of Auckland affecting nearly 2 million people. The outbreak has been largely contained.
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The country’s experiences are a reminder of what it takes for a society to remain virus free, and how easily that status can be undermined by an infection whose spread is still not completely understood.
These are lessons to be learned as Hong Kong tries to shake off a fourth wave of infection, thanks to loopholes in the anti-infection regime, and eases social-distancing measures yet again. Even if the vaccination campaign goes smoothly and achieves wide coverage, it will be some time before it confers a significant degree of community protection.
