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Tara Alessandra Abrina, Annette Balaoing-Pelkmans, and Jane Lynn Capacio

Lockdowns are an effective measure to contain the spread of disease during a pandemic. But how do we prepare for the economic effects that come with them?

Key Points

• A lockdown is one of the most effective containment measures, especially towards the peak of a pandemic. But its crippling effects could lead to an economic crisis, which will especially hit those living below the poverty line, particularly in urban areas.
• There are several containment measures, and the optimal choice is based on the phase of the pandemic a region is in and the enforcement capacities of public authorities. A review of containment policies of countries that seem to handle the pandemic better shows that they employ a calibrated approach.
• We encourage localized early-pandemic approaches in provinces outside of Metro Manila particularly in the Visayas and Mindanao. Given the relatively long period before the peak of the pandemic is reached, premature lockdowns magnify the economic costs of COVID-19.

Phases of a Lockdown

An unprecedented number of lockdowns worldwide has recently been imposed by governments in their race to win the war against COVID-19. The need to strike a balance between socio-psychological, economic, and health objectives present policymakers with an extremely difficult dilemma. On the one hand, an early and stringent enforcement of a lockdown has high economic costs and might induce lax behaviour among the population if the period before the peak of the pandemic is too long. Countries acting too late, on the other hand, risk hastening the spread of COVID-19 with tremendous loss of lives as a consequence. Among the key factors driving the timing and extent of a lockdown are (1) the phase of the pandemic a region is in, and the (2) quality of preparedness of public authorities.

The World Health Organization (WHO) has developed a six-phased approach for pandemics in order to facilitate the design of national preparedness and response plans.4 Phases 1 to 3 is the preparation stage that includes capacity development and response planning activities. These early stages are characterized by virus transmissions among animals, followed by animal-to-human transmission, eventually leading to small clusters of disease in people, without human-to-human transmission observed.

The critical phases cover Phase 4 to 6, requiring response and mitigation efforts. In Phase 4, human-to-human transmission of the virus has been verified so that the risk of community-level outbreaks emerges. Early response and preventive measures are most critical at this stage. Phase 5 is when human-to-human virus spread in at least two countries in one WHO region has been observed. At this stage, the time for more proactive mitigation measures is short. At the Phase 6 is the pandemic stage where treatment and quarantine measures are most urgent.

In Table 1 (below), we apply these phases and cite the mix of containment measures according to the level of preparedness and quality of governance.

Containment Measures

Ideally, rapid containment of the disease should be aimed for without resorting to an economically and socially costly lockdown. This is one of the key lessons learned, especially by countries most severely affected by the SARS epidemic in 2003. At the end of the outbreak on 14 July 2003, the number of probable cases were 8,437 worldwide with a 10% fatality rate, totaling to a death toll of 813. The direct and indirect economic costs of SARS were estimated to be around 40 to 50 billion dollars (Lee & McKibbin, 2003). Estimates of the costs vary depending on the extent to which second-order effects are taken into account. China and Hong Kong for example suffered the greatest loss in investment (inward & outward), retail sales, restaurants, hotels, tourism and air transport (Keogh-Brown & Smith 2008).

The approaches taken by Taiwan, Hongkong, and Singapore to address COVID-19 are therefore geared to rapidly mitigate the spread of the disease at an early stage without a general lockdown. Arguably, these countries used their lessons from the SARS experience and are better prepared for COVID-19.5 Singapore, in particular, adopted a “whole of government” approach, which looks at health, economic, foreign affairs, and other considerations to their management of the crisis. Even South Korea has avoided the crippling consequences of a lock-down, opting for massive testing and big data approaches instead.6

Germany has also not taken the drastic lockdown measures seen in Belgium, for instance, but it is an outlier in Europe with a proactive approach to testing. The fact that it has conducted more than 160,000 tests weekly and early on in the pandemic could very well be responsible for its low fatality rates, despite having a high incidence of infection. Out of more than 42,288 recorded positive cases for COVID-19 (as of 27 March 2020), Germany only registered 253 deaths. This is in stark contrast with the French record of 28,786 infections and 1,695 fatalities.

As Figure 1 (above) shows, the principal means of containment changes as the pandemic progresses. During the early-pandemic phase, proactive testing, contact tracing and other Big Data approaches dominate. For countries with low-level of preparedness and serious scarcity in testing resources, lockdowns are earlier resorted to as means of containment. The effectiveness of selective quarantine is only as good as the coordination between the health, information (including ICT), and security government agencies. In the absence of technical and coordination capacities, lockdown measures are earlier put in place. The problem is that given the relatively long period before the peak of the pandemic is reached, premature lockdowns magnify the economic costs of a pandemic.

At a critical point of contagion, partial or full lockdowns become inevitable. Testing as a preventive measure becomes relatively less important since the entire population is quarantined. Even rich countries such as the Netherlands, have made it their policy not to test proactively also because the scarcity of testing materials and health care personnel do not allow it. The Dutch case as well as that of Italy and Spain, demonstrate that at the height of the pandemic stage, the pressure and demand on the resources of the health system to contain the disease would hardly leave room for more preventive approaches.

Balancing Health and Economic Objectives

Behind the choice of an optimal level of restriction, is the delicate balancing of health and economic objectives, as well as short- versus long-run costs (see Figure 2 below). Various public economic agencies are estimating an economic crisis due to the COVID-19 pandemic worse than the world has seen during the global financial crisis of 2007–08. Lockdowns extending to 6 months or even a year would have catastrophic economic consequences. It is for this reason that the Dutch government, for instance, continues with its policy of an intelligent lockdown, where containment measures are taken7 without a complete lockdown, even if it seems to be quickly approaching the height of the pandemic. With the exception of restaurants and bars, many shops remain open (not only essential businesses such as supermarkets and pharmacies); public transport remains running, albeit at lower capacity and frequency; and work-at-home is encouraged but not compulsory. Factories remain open, although voluntary work stoppages are increasingly observed because of sharp drop in market demand. The verdict is still out as to just how intelligent the Dutch lockdown will turn out to be. The incidence of new hospital admittances, at the time of writing, have been going down for three straight days, resulting in some cautious optimism.

The policy resistance of many countries to a full lockdown is driven by the fear of a grave economic backlash even long after the pandemic has passed. Especially towards the peak of the pandemic, the importance to save as many lives as possible is more than obvious, and if the only remaining options are to lockdown the entire population and shut down the whole economy, then so be it, notwithstanding the costs. Denying the gravity of the disease which results in the free propagation of the disease is the summit of political irresponsibility.

However, the consideration of the cost to millions of people is equally important even amid the panic of a full-blown pandemic. The archipelagic nature of the Philippines has permitted a partial lockdown, which has enormous costs given the Luzon-centric orientation of the economy. However, the Luzon Enhanced Community Quarantine (ECQ) was announced when there were only 142 cases and 12 deaths—arguably an early-pandemic stage, when compared to China and Europe. Already the NEDA projects that the economic costs of the Luzon ECQ may see negative GDP growth in 2020 and a loss of 1 million jobs, but only if the ECQ is not extended past mid-April.8 There are independent projections that the peak of the pandemic may even reach past April and well into June.9 If this is the case, the Php 200B provision from the Bayanihan to Heal as One Act of 2020 will not be enough to provide social amelioration for the most vulnerable households in the entire country.10
Granted that the ECQ was not premature given the impossibility of massive testing (due to scarce resources) and weak coordination and technical capacities for more proactive mitigation measures, we join the call for a localized response11 for other provinces, particularly those in the Visayas and Mindanao.

The fact that Visayas12 and Mindanao13 are still at the early-pandemic stage in terms of the extent of contagion makes it imperative to apply the vital lessons of crisis management from the experiences of other countries and those from the Luzon ECQ. The policy goal should be to proactively contain the spread of COVID-19 while keeping much of the vital sectors of the economy running. Tourism and the retail sectors might inevitably suffer, but the agricultural and fisheries sector must be allowed to effectively operate, not only for food security reasons, but as a means to protect the already low incomes of smallholders and fisherfolks. Mass transport should not be completely shut down provided that measures (e.g., social distancing) are put in place. Express lanes for perishables and basic agricultural and fisheries products should be provided for.

The COVID-19 pandemic will inevitably end. As we heal from the ravaging disease, we must also ensure that not many more suffer from the inevitable surge of poverty from an economic stand-still. •

References

Keogh-Brown, Marcus Richard, and Richard David Smith. 2008. “The Economic Impact of SARS: How Does the Reality Match the Predictions?” Health Policy 88, no. 1: 110–20. https://doi.org/10.1016/j.healthpol.2008.03.003.

Lee, Jong-Wha, and Warwick J. McKibbin. 2004. “Estimating the Global Economic Costs of SARS.” In Learning from SARS: Preparing for the Next Disease Outbreak: Workshop Summary. Washington, DC: National Academies Press.