Abstract
How long will the Covid-19 lockdowns go on and when can people go back to work? This is the big question many people are asking. The longer the lockdowns persist, the longer businesses have no cash flow, and the higher the risk of an insolvency crisis. Chao Choon Ong has been analysing the corona virus infection rates and the timelines since the crisis began. Here is his take.
About Chao Choon Ong
Chao Choon is the Deputy Chairman and Advisory Leader of PricewaterhouseCoopers Singapore and Managing Partner of PricewaterhouseCoopers Myanmar. He is also Board Member and Audit and Risk Committee Chairman of the Singapore Food Agency and Art House Limited, and Member of the Nanyang Business School Alumni Advisory Board.
Morgan Stanley Research has released a chart on the Projected Timeline and Milestones for a Return to Work in the US. Refer Chart 1 below. Some observations about the chart:
- The chart sees the rate of new cases peaking at the end of April 2020
- The chart sees a sharp drop in new cases in May
- Based on this scenario, the Covid-19 infection rate will go down to early March levels (<300 new cases per day) by early July 2020 … which is 3 months away.
- The question is, how soon after “manageable level” would the lockdown be lifted? China waited another month (2 infection cycles).
- The US government may be thinking that it can do so sooner, as the Republican convention is scheduled for August and Democrats may be planning theirs in July.
- Even so, it would mean a lockdown of more than 3 months for the US.
- Without US consumption for another 3 months, what would be the economic impact? Since US consumption has been the driving force of the global economy
- How realistic is this timeline? At first glance it looks optimistic.
Extrapolating from historical infection growth rates, the US is expected to hit 1 million infections around the middle of April 2020. The chart above (which does not show numbers) shows that new infections will peak at the end of April.
However the projected drop thereafter is very steep. The question is: what assumptions are the projected drop based on? Let’s compare with the more “advanced” countries – China, Italy, Spain and Europe (in this order). This is shown in Chart 2.
A review of Chart 2 shows:
- China infections took 2 weeks to peak. But their lockdown was very drastic and not possible for most countries to follow.
- Italy, Spain and all Europe took about 3 weeks to peak, but the decay has been slow and more like a plateau for the last 2 weeks. We are still waiting for a sharp drop.
USA is still on the up-tick, and infection rates are increasing much more aggressively than any other country. While there are early signs of slowing growth, given how ill-prepared USA was and how far it allowed the Covid-19 infection to get before it acted, it may take a while more before it peaks. Then the trillion dollar question is – How will the US infection rate decay? Steep drop like the Morgan Stanley model? Or slow decay like Europe?
