Abstract
The novel coronavirus (COVID-19) epidemic represents a major challenge for the world economy. While a detailed longer-term diffusion path of the new virus cannot be anticipated for individual countries, one may anticipate international supply shocks and declining GDP growth in many OECD countries and China in 2020; and one should expect falling asset prices in Asia, the United States and the European Union plus the United Kingdom – except for the price of risk-free government bonds. In the course of 2020/21 the US, the EU and the UK, as well as other countries, will face both an increasing number of infected patients as well as a higher case fatality ratio. Health care expenditures in the US could increase more than in the Eurozone and the EU in the medium term, a development that undermines the international competitiveness of the United States. The analysis suggests that per capita income is a positive function of the effective trade openness and of the new Global Health Security Index indicator from the NTI/Johns Hopkins University. A rising health care-GDP ratio in the US is equivalent to a rising US export tariff. As regards the coronavirus challenge, the ratio of acute care beds to the elderly in OECD countries shows considerable variation. Due to international tourism contraction alone, output growth in the Eurozone, the US and China can be expected to fall by about 1.6% in 2020. The COVID-19 challenge for the US Trump Administration is a serious one, since the lack of experts in the Administration will become more apparent in such a systemic stress situation – and this might well affect the November 2020 US presidential election which, in turn, would itself have considerable impacts on the UK and the EU27 as well as EU-UK trade negotiations. Integrating the health care sector into macroeconomics, which should include growth analysis, is an important task. The role of health quality - and health insurance coverage - for endogenous time horizons and economic welfare, respectively, is emphasized.
Highlights
The novel coronavirus epidemic which started at the end of 2019 in the Wuhan area of China has, within three months, affected about 90,000 people worldwide of which approximately 3000 have died
In the EU and the US, this has included imposing quarantine on people who have recently returned from abroad – for example, from China – or who have participated in certain social events in which individuals who have tested positive for COVID-19 had participated and who have been on the radar of health authorities
COVID-19 is spreading worldwide and on March 11, 2020, the World Health Organization (WHO) defined the international epidemic to be of a global nature: COVID-19 was by that date officially regarded as a pandemic
Summary
The novel coronavirus (for short COVID-19, or COrona VIrus Disease 2019) epidemic which started at the end of 2019 in the Wuhan area of China has, within three months, affected about 90,000 people worldwide of which approximately 3000 have died. Many firms in Germany and France have encouraged employees to practice home office and have tried to minimize infection risks within the company; other countries, including the US, have followed in March 2020. Such adjustment measures in firms, while pragmatic, will go along with reduced labor productivity and innovation, but at least a lot of important work can still be done remotely. In car factories – for example Volkswagen – workers have raised the question of why production should continue meaning that workers are exposed to a spreading infection while white collar workers are sitting at home with the family following the government-imposed restrictions in many western OECD countries in mid-March, namely to avoid situations with many people congregating in the same area. The subsequent analysis is based on knowledge available at March 24, but the theoretical approaches highlighted and developed here should be useful beyond changes in the CORVID-19 statistics
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