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Economics: How lockdowns impact global supply chains

Nature Human Behaviour

June 3, 2020

The duration of COVID-19-related lockdown measures and the number of countries in which they are implemented have a greater impact on global supply chains than the severity of the restrictions, according to a modelling study in Nature Human Behaviour. Global supply chains are the systems for the worldwide production and distribution of goods and services. The research also suggests that gradually easing containment measures that could eradicate the disease generates smaller losses than lifting restrictions quickly and then having to reintroduce lockdown.

The COVID-19 pandemic has now spread to nearly every country in the world and has led to containment measures including strict controls on travel, social interactions and commercial activity. Dabo Guan and colleagues used an economic disaster model to quantify the short-term effect of different containment methods on global supply chains and to investigate how pandemic-related losses will be distributed along supply chains.

The authors modelled 39 individual scenarios based on four sets of containment scenarios. Three sets were based on the geographical spread of the virus, duration of lockdown and strictness (the percentage by which labour and transportation availability is reduced relative to pre-pandemic levels). The fourth set modelled the potential impacts as lockdowns ease, including possible damage if restrictions were in place for a longer period of time or had to be reintroduced.

In a scenario in which a two-month lockdown of 80% strictness had been implemented only in China, the authors found that the supply chain effect would have been 3.5% of global GDP. However, this increased to 26.8% if the scenario were enforced globally. Increasing the duration of an 80% lockdown from 2 to 4 months increases the global economic losses from $20 trillion to $22.7 trillion. The authors also found that countries not directly affected by the virus experience large economic losses as a result of containment policies in affected countries and that low- and middle-income countries are particularly vulnerable to these indirect effects.

The authors modelled three recovery scenarios for the lifting of restrictions and found that lifting restrictions over a 12-month period with a 20% reduction in labour and transportation resulted in lower losses than lifting restrictions quickly and then having to reintroduce lockdown. They found that in the United States, forecast losses from lifting the restrictions slowly over 12 months were 24.6% to 54.8% less than if restrictions were lifted quickly and had to be reintroduced.

The authors also suggest that if the pandemic were to reoccur, shorter and stricter lockdowns, which may depend on global coordination, could reduce losses by around 11% globally. They argue that a global collective effort is required to eradicate the disease as well as minimise the economic impacts to national and global supply chains.

doi: 10.1038/s41562-020-0896-8

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