Coronavirus Watch: Don’t blame it all on lockdowns
Many observers have blamed the especially sharp H1 GDP falls in the UK and Spain on those countries’ lengthy lockdowns. This suggest that both economies may enjoy especially sharp bounces in activity in H2, but there is a risk that their rebounds could still underwhelm.
Bad luck, measurement issues, and other factors outside policymakers’ control may have played a role in the UK and Spain suffering longer lockdowns and deeper economic contractions than their neighbours did. But delays in locking down lengthened the time needed to control the virus’ spread, and they now look like big blunders.
Bigger GDP falls may trigger larger rebounds as lockdowns are reversed. But some signs show that perceptions of the UK and Spanish governments’ mishandling the crisis have resulted in businesses and households reverting to pre-Covid behaviours more slowly than elsewhere. If this is the case, it could undermine the strength of their economic rebounds after the initial bounce in post-lockdown growth fizzles out.