With the coronavirus in rapid retreat across Europe and Asia and in parts of the U.S., there is a sense that the worst of the pandemic might finally be over. But two words hover over any prospects for a global recovery: second wave.
The possibility that COVID-19 might come roaring back, either because lockdown measures are ending or because colder weather will return in the fall, is scrambling predictions about how and when the world might emerge from its sharpest economic downturn since the Great Depression nearly a century ago.
The pandemic’s trajectory, say economists, is simply too uncertain—a fact that, of itself, could hobble the willingness of companies and governments to invest and grow.
On Wednesday, the Organization for Economic Cooperation and Development, or OECD, said with a second wave of COVID-19, global GDP would drop by more than 7.5%, and about 40 million more people would lose their jobs.
Even without a second wave, the OECD predicted a dire 6% decline in global GDP this year, “larger by far than any we have projected in the 60 years since the OECD was created,” the organization’s Secretary-General Angel Gurría said, launching the organization’s yearly World Economic Outlook; the Paris-based organization collects data on the world’s richest economies, with 37 member countries. The OECD’s chief economist Laurence Boone said a second wave of COVID-19 would “markedly affect” the world economy in 2021, and that “massive uncertainty regarding the virus” suggested long-lasting economic damage, worsened by consumer behavior and trade tensions. “All that will hold back investment,” she said.
The OECD prediction was grim indeed—but it is not the only one to emerge this week.
“The greatest downside risk”
On Monday, a panel of 48 U.S. economists from the National Association of Business Economists predicted a 5.8% GDP drop in the U.S. this year—the steepest decline since the 1940s, and a one-third drop in the second quarter of 2020 over the same quarter last year.
They forecast some economic recovery later this year, but only on one condition: That COVID-19 does not surge back. If it does, it would torpedo all predictions of a recovery. “Eighty-seven percent of panelists view a second wave of COVID-19 as the greatest downside risk through 2020,” said Eugenio Alemán, a Wells Fargo economist who chaired the study.
In fact, the damage could extend far beyond this year or next, according to many economists.
Marc Touati, an economist in Paris, estimates that it could take until 2026 for France to return to pre-pandemic economic levels. The French government predicts that GDP in the world’s sixth-biggest economy will contract about 11% this year. Given that, even if GDP steadily increases by about 2% a year, “it will take about five and a half years to get back to 2019 levels,” Touati, who heads ACDEFI, a Paris economic consultancy, told Fortune on Wednesday. “If we have a second wave, we have no means to make a new recovery,” he said.
The economic disaster comes as no surprise to economists like Touati.
Indeed, Touati said he warned France’s Economy Minister Bruno Le Maire of calamitous consequences from sweeping lockdown measures, and still believes that the decision by dozens of governments around the world to impose broad lockdowns has been a severe error.
He shared his concerns in a crisis meeting with Le Maire and about 10 other economists on March 4—10 days before President Emmanuel Macron announced a nationwide lockdown. “I told him, ‘If you impose a lockdown we will have a big depression,’” Touati said. “Others said ‘No, no, we have to impose a lockdown.’ It was fear. It was panic. We reacted too late.”
How a second lockdown would look
Touati hopes governments will be defter at handling the next outbreak, including a second wave of COVID-19.
That would include imposing limited lockdowns of people regarded as most vulnerable to the coronavirus, rather than broad nationwide restrictions, he said. He also believes governments should prepare extensive contact-tracing systems, ramp up ICU beds, and lay in stocks of protective equipment.
To the dismay of the French, who boast of having first-class public health, the country had no stock of facial masks when the pandemic hit Europe. Compare that to Germany, which had plenty. Three months on, more than 29,000 people in France have died of the virus, compared with 8,000 in Germany, whose population is far bigger. “We were not prepared,” Touati said.
For now, at least in Europe and much of the U.S., the idea that COVID-19 will come surging back feels increasingly remote, as people resume more and more of their pre-pandemic lives.
In Paris, for example, people have poured into the parks since they reopened earlier this month, soaking up the long summery days, and the sidewalk tables are jammed each evening after the cafés reopened for outdoor dining after a 10-week shutdown. In the U.S. and across Europe, thousands have joined street protests against racism since George Floyd’s death on May 25, seemingly brushing off social distancing instructions, as though the pandemic is as good as gone.
Sadly, that might not be the case.
The World Health Organization’s chief scientist Soumya Swaminathan told CNBC on Tuesday that a second wave was “a very real risk,” as countries reopen public spaces and end lockdown measures. “We don’t know if it will be a second wave, a second peak, or a continuing first wave in some countries,” she said. “It really hasn’t come down that much at the time of reopening, and so all of these possibilities are very real.”