CORNAVIRUS SECOND WAVE BEGINS
The onset of tourism and the relaxation of social distancing rules show that a Second Wave of COVID-19 infections is starting.
My assumption, published on July 8, was that this Second Wave would be more prevalent in the fall, as people return to work and school, and as the wider flu season starts.
Before reviewing the daily new cases, some issues we should all consider:
If the trend in new infections continues, how will schools re-open in September?
Has the interim been used to strengthen public and private health systems and increase the number of intensive care units needed? What measures are in place to handle the non-COVID medical case backlog that has been delayed by the Pandemic?
What alternatives are there to a full lockdown? The case of Beijing apparently showed that a second wave could be beaten with a partial lockdown. Are we ready to make the same sacrifices in Europe? Do we have enough testing kits? Do we have an adequate track and trace system?
The EU Pandemic Response Fund of € 750 billion has been hamstrung due to leader obsessions with issues such as the Green Economy and the Digital Economy. While these are worthy objectives, the scale of the COVID crisis means that immediate resources are needed now. Moreover, disbursement will be phased in over at least 3 years, and I estimate that less than 50% of the budget is available for direct COVID response. The only hope for serious fiscal measures remains the European Central Bank, unless something changes.
Every economic indicator shows that the damage to GDP, public expenditure, unemployment, corporate and personal bankruptcies and firm closures is severe.
Nevertheless, several steps should be taken now by governments to prepare themselves financially and to gain the financial resources needed for at least another 12 months of active support programmes.
In Cyprus, 2 months of lockdown cost approximately 10% of GDP in direct public financial support (not all of which has been disbursed). In Greece, the reputed amount is approximately 7.5% of GDP.
Despite all public support, Euro Area GDP is down 12.1% in Q2 2020 over Q1 2020.
So the economic damage is severe and will get worse. Urgent steps are needed.
Now let’s look at the charts: all data has been extracted from the Worldometers coronavirus page on Monday, 3 August 2020 at 08:00.
The increasing number of daily cases at the end of July 2020 has prompted the Ministry of Health to pass new measures, including wearing a mask in public and enclosed areas. Tourist arrivals in June were down by some 95% over June 2020, but arrivals have picked up in July. It remains to be seen how tourism will impact COVID cases, but we are assuming it will through a higher case number.
The number of daily new cases has been rising and shows a “second wave” amplitude. The total active cases has been higher than it was during the lockdown for most of July. Greece is entering the high point of its tourist season this month (August), and UK arrivals have been taking place since mid-July. Greece is monitoring source market developments, and recently re-instituted the PCR COVID test for travellers from Bulgaria and Romania. However, the lack of testing resources, or their uniform application, will definitely result in coronavirus cases being imported into the country.
Spain is showing a clear second wave taking place, with 3,091 new cases reported on 31 July, the most recent date for which data is available. The increase in new cases has led the UK to re-impose a 14-day self-isolation on returning British residents or any travellers from Spain.
The first signs of a second wave are visible. This is more clearly seen in the 3- and 7-day moving averages of new cases.
Italy is showing no cases of a second wave. Recent reports indicate that tourism arrivals are still relatively low. Absent a tourism and travel causation, we believe that the main threat of a second wave will occur once schools re-open in September, and once the flu season starts later in the fall.
This is a case where the second wave began relatively quickly: by the end of May 2020. The surge in cases has been attributed by various commentators to allowing schools, synagogues and public assemblies to resume, without adequate testing or tracing. Whatever the case, the severity of the second wave of cases has been significantly more severe than the first in terms of transmission and total numbers.
In Romania, one can argue that the second wave is essentially a continuation of the first wave. Whatever the semantics, the data show that eradicating the disease is incredibly difficult.
Russia remains in the first wave. The disease spread early: attempts at a lockdown were half-hearted. The lock-down was significantly shorter in duration than that of many other countries, and was apparently interrupted for election reasons as well as for a major parade. It was also less severe than other countries in terms of what residents were allowed to do. We believe this is a key reason why the Russian government has been hesitant to allow international travel. Allowing travel now will almost certainly result in a rebound of cases.
The United States appears to be very much on the first wave of the virus. Attempts by President Trump and the Republican Party to ignore and then diminish the virus were then followed by lifting lockdowns early and then by ignoring basic public health and sanitation measures. At present, the situation is highly fragmented, with some states taking relatively few measures while others attempt stricter ones. The increase in summer travel in the United States will almost certainly lead to a higher case number, as well the resumption of schools in September.
This monthly update shows that while many countries continue to struggle with the first wave of coronavirus infections, other countries are now embarking on their second wave.
The conclusions we can readily assert are that:
The coronavirus remains rapidly transmissible and present in every country and population, and will remain so for years to come. Even a vaccine will likely not be totally effective, and will likely require frequent booster shots given what we know so far. We do not see vaccines becoming effective at the system level before mid- to end-2021. The real national impacts of a vaccine will only be felt in 2022.
Second waves are predicted to start (or intensify) once social isolation measures are relaxed. When schools, companies, public transport, mass retail and other "normal life" activities resume, the rate of coronavirus transmission will resume and increase.
The economic and social damage from the virus are massive and will continue for at least another 12 months. Governments should be preparing to renew their support programmes at a much higher rate and prevalence. This will mean rising public debt.
Companies and entrepreneurs face a crushing and long-term blow to their operations. Whether this is tourism companies or restaurants or universities or mega-churches, any type operation that relies on the physical assembly of humans is likely to prove a risk vector for COVID transmission.
Every company, solo entrepreneur or economic operator of any kind needs to take urgent and immediate steps now to prepare. Every planning assumption and forecast needs to be reviewed, including the availability of public funding. Significant changes need to be made to operations and overhead costs. We are heading for a disruption that will last far longer than we think.
Every family and individual needs to safeguard their health, their resources and their operations. For the foreseeable future, we need to take active measures against COVID infection and transmission. The risks to a couple or family if only one member gets the virus are obvious. The risks in countries like the United States, where public health is in private hands, are not just in terms of physical survival, but financial survival as well.
Good luck and stay safe.
Navigator Consulting Group
Resources & Further Reading
Coronavirus data was accessed on Worldometers on Sunday, 2 August at 17:30
Navigator Consulting. 31 July 2020.
Vox. 8 June 2020
Bloomberg. 7 July 2020.
Bruegel. 16 July 2020.
Navigator Consulting. 18 July 2020.
Navigator Consulting. 29 May 2020.
Eurostat. 31 July 2020.
Navigator Consulting. 6 April 2020.
Navigator Consulting. 26 March 2020.
Navigator Consulting. 18 March 2020.