COVID-19 Crisis Management in Luxembourg: Insights from an Epidemionomic Approach

Abstract

We develop an epidemionomic model that jointly analyzes the health and economic responses to the COVID-19 crisis and to the related containment and public health policy measures implemented in Luxembourg and in the Greater Region. The model has a weekly structure and covers the whole year 2020. With a limited number of parameters, the model is calibrated to depict the pre-crisis evolution of the Luxembourg economy, and to match post-lockdown leading economic indicators and industry-specific infection curves. The nowcasting part of our analysis reveals that each week of lockdown reduces national output by about 28% (and annual GDP by 0.54%). A first peak of the infection curve was observed at the very beginning of April. If the lockdown measures had been permanent, annual GDP would have decreased by 22% in 2020, the number of COVID-19 cases would have reached zero around mid-June, and the proportion of recovered people would have reached 1.4% of the population. In an economy heavily relying on skill-intensive services, we show that the role of teleworking has been instrumental to limiting the weekly economic output loss (almost by one half) and the propagation of the virus. In the forecasting part of the analysis, we quantify the epidemiological and economic responses to gradual deconfinement measures under various public health scenarios. If the post-lockdown transmission rates could be kept constant throughout the deconfinement period, restarting all sectors would have huge effects on the economy (limiting the annual GDP loss to about 7%) and no effect on the aggregate infection curve. While it is a good time for lifting containment measures, there is also a risk that increasing the density of employees at the workplace and resuming social activities would induce a rebound in the infection curve. Preventing such a relapse is possible with PCR testing of both national and cross-border workers, and with accompanying measures such as (i) maintaining teleworking practices, (ii) reopening hotels, restaurants and cafes at half of their full capacity or with equivalent physical distancing measures and last but not least, (iii) sustaining distancing measures in social activities. Overall, in our worst-case scenario, combining bi-monthly testing with contact tracing and quarantining measures appear to be a sufficient (perhaps not necessary) policy option in the aftermath of the deconfinement plan.