Lifting Lockdowns Amid High Infections Won’t Boost GDP, IMF Says

Lifting lockdowns is unlikely to lead to a decisive and sustained economic boost as long as Covid-19 infections remain elevated, because people will probably keep avoiding social interactions out of fear of contracting the virus, the International Monetary Fund said.

New IMF research shows that while government lockdowns contributed significantly to the global recession, the slowdown was also driven in large part by people continuing to exercise voluntary social distancing, the fund said in a blog post Thursday accompanying a chapter from its updated World Economic Outlook. The fund will publish new forecasts on Oct. 13 during its annual meeting with the World Bank.

The findings, using high-frequency mobility data from Alphabet Inc.’s Google and job openings from Indeed Inc., should warn policy makers against lifting lockdowns amid elevated infections in the hope of jump-starting economic activity, IMF said. The findings call for reconsidering the idea that lockdowns involve a trade-off between savings lives and supporting the economy, the fund said.

“Addressing the health risks appears to be a pre-condition to allow for a strong and sustained economic recovery,” IMF economists Francesco Grigoli and Damiano Sandri wrote.

The IMF and World Bank will hold their annual meetings next week, moving to a virtual format due to the outbreak rather than their usual in-person gatherings in Washington. While the IMF will make a small upward revision to its 2020 forecast and the global picture is less dire than three months ago, the recovery will be long and uneven, Managing Director Kristalina Georgieva said earlier this week.

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