Rolling lockdown release risks stymieing consumer demand
There is a meaningful risk that the forecast and significant rise in unemployment in many nations will add to the financial pressure on service sectors struggling to regain profitability while implementing social distancing. This interim socially distanced period between lockdown and vaccine will present a number of challenges in these sectors for which there are few easy answers.
The challenge for policy will therefore be how to implement a progressive rollback of lockdowns while maintaining a sufficient level of consumer demand to incentivise business to keep people on the payroll and continue investing wherever possible. We note the UK’s furlough schemes is unlikely to be extended indefinitely as it costs the government around 2% of GDP per month.
While a rolling restart might be optimal from a virus perspective, policies which mitigate the impact of rapidly rising unemployment in this scenario may be necessary, as the younger working-age segment of the population makes the lifestyle and financial sacrifices necessary to protect the health of older members of the public.
Edison Group – also photo