Signs of reopening after the pandemic

U-shaped recovery

The slowing speed of infection worldwide is allowing many countries to continue their attempt to ease lockdown measures further to soften the economic slowdown, while maintaining public health and safety. In places where new infection cases may have peaked, such as China and Hong Kong, businesses started to reopen; however, some forms of social distancing measures will likely remain in place until a vaccine is developed. With the global demand slump and consumer behaviour change due to the risk of a second wave of the coronavirus, the recovery trajectory will likely to be U-shaped rather than V-shaped in the second half of 2020. Early signs from South Korea showed that external demand remained weak in contrast to the soft improvement in domestic demand. Sales at major department stores in the first three weeks of April saw a smaller contraction compared with March. But the subdued trade will likely weigh on the domestic recovery. South Korean exports for the first 20 days of April marked a 20% year-on-year contraction, reflecting the global demand shock from containment measures. Other export-dependent economies are projected to face a similar weakness in their external sector.

Resumption of small business

As of May 8, many nations in Europe are seeing their social distancing measures start to ease in selective or low-risk sectors. For example, Germany, Switzerland, Austria, Belgium, Portugal and Greece have reopened some of their business operations. Among these are small shops, hardware stores, car dealerships, hairdressers and bookstores. Other larger activities and businesses, like soccer matches, music festivals, larger malls and movie theatres, are expected to resume by June. In Asia, Malaysia has recently allowed restaurants, offices and shopping malls to open, so long as they follow strict distancing regulations. For Thailand, measures have been eased for marketplaces, grocery and retail stores, outdoor sports, hairdressers and pet shops. Although these are good signs for economies worldwide, an example from China suggests that activities may not return to normal in the near term. China was among the first countries to ease restrictions, allowing retail stores, factories, shopping centres and movie theatres to operate again. Production has been restored to 85-95% of normal levels. But data such as retail footfalls, daily coal consumption and electricity usage have stagnated below pre-crisis levels.

Q Partial school reopening

Apart from businesses, school have begun to reopen, albeit under new norms. For instance, in China, students are obligated to fill out an online survey to calculate their risk of infection. Only those that are in good health according to the survey’s calculation are allowed to enter schools. Teachers and students are among the key groups who are also required to test for Covid-19 in order to prevent a second wave of infection. Similarly, parents in Israel are required to sign a health form confirming that their children are not infected before their kids can go to school. In Taiwan and Japan, students will have their temperature checked before they enter school buildings. Meanwhile, classes are being held outdoors in Denmark and Norway. Elsewhere, most schools should reopen after June, but with strict restrictions to follow. Online learning is expected to continue for several months where possible.

Easing of domestic travel

In terms of travel, although cross-border movement is still banned in most countries, domestic flights are now allowed in Vietnam, China and Hong Kong, as well as Thailand. These flights are operated under strict requirements. Passenger temperature checks and sanitisation measures are strictly conducted before and after each flight. Flights and trains in China, for instance, are running at a lower frequency. Also, most airplanes have disposable plastic covers over passengers’ seats. In addition, the 14-day home quarantine has been lifted for travel from lower-risk regions to Beijing. Consequently, tourist attractions in many nations have begun to reopen for local visitors, though the number of domestic tourists is still quite low because of virus fears and measures to minimise spreading. The Forbidden City in Beijing, for example, allows a maximum of 5,000 visitors daily to prevent crowding. Museums and archaeological areas in Italy, most of which will reopen by mid-May, are less busy compared with previous spring seasons. Overall, aviation and tourism industries should remain muted for some time, as international travel bans are expected to be among the last to be lifted.

The gradual path

Overall, the extent of export dependence, effectiveness of the Covid-19 containment measures and policy stimulus will likely determine the post-pandemic recovery path. As job losses and economic hardships are becoming more prevalent, governments will continue to ease lockdown measures in key or low-risk sectors. For China, we think the first-quarter contraction was the hardest hit and the economy will bottom out in the second quarter. For the rest of Asia, the second quarter will likely see the sharpest contraction before a gradual recovery in the second half of the year.