China, having battled SARS in 2002–03, ought to have been more prepared to deal with COVID-19 than any other country.
The country’s authoritarian and autocratic leadership could have facilitated swifter containment of the outbreak. Over the years, having worked its way up to being the world’s second largest economy with a GDP of $13.6 trillion, China had sufficient resources to deal with the crisis.
The initial response of downplaying the situation in December and early January might have been motivated by efforts to maintain a façade of normality so as not to jeopardise the economy. This proved to be non-sustainable. China’s Central Bank flooded the market with 1.2 trillion yuan ($173 billion) when the extended Lunar New Year holidays ended, to ensure sufficient liquidity in times of the outbreak.
Schools, businesses, retail stores and cities were suddenly in complete lockdown, a move that affected more people than the population of North America. International stores including Starbucks and Ikea were shut indefinitely across the country. Hospitals were overcrowded and there were medical shortages. These factors made it impossible for the economy to rapidly swing back to normal. As the travel restrictions lifted mid-February across various parts of China, the People’s Bank of China (PBOC) reduced the reserve requirement ratio (RRR) for banks by 50-100 basis points (bps), further increasing market liquidity.
Disruption of supply chains and labour shortages affected international trade, threatening China’s reputation of being a reliable trade partner.
Global experts questioned the reliability of the outbreak reports from China as officials continued to reassure its citizens and global markets of its economy’s capacity to bounce back. The economic setback to the world’s second largest economy that contributes to 25 per cent of the global manufacturing output had far-reaching effects on the rest of the world.
South Korea, Japan and Italy emerged as the next outposts for the outbreak. South Korea’s sophisticated healthcare system seemed adequately equipped for testing, quarantines and clinical management, having dealt with SARS in 2002–03 and MERS in 2015. Many other developed countries hastily put together protocols to detect and manage the illness clinically, and researchers looked for treatment and vaccination options.
Many policymakers across the globe cut bank rates, offered tax breaks, or compensated lost wages. The purpose of these coordinated efforts was to ensure liquidity in the market so that supply and production could continue. This would prevent an initial supply shock and subsequently, an early demand shock, allowing businesses and individuals to adjust and cope with the new situation, and make coordinated efforts to mitigate the situation and avoid economic crisis.
The USA struggled with conflicting political agendas amidst the crisis. Previously, Donald Trump in his presidential budget for the next fiscal year had requested a cut of $3 billion from global healthcare programmes, indicating reduced priority for these projects. A 53 per cent reduction in WHO funding, 75 per cent reduction in Pan American Health Organisation and a 16 per cent reduction in US CDC’s budget were proposed. These are the leading organisations spearheading the coronavirus containment efforts!
After the COVID-19 outbreak, his government requested $2.5 billion to manage the situation. He was offered $8.3 billion by the Senate minority leader, Chuck Schumer, which he quickly accepted.
Trump, a self-proclaimed germophobe, seemed rather upset when Americans were evacuated from the Diamond Princess cruise ship and brought back to the US. As the number of cases in US grew quickly in February 2020 and the US could not scale up testing facilities promptly, an outbreak became certainty. Mid-March, the White House discussed options of substantial cut in payroll taxes to protect hourly wage earners and additional loans to small businesses, to aid them through this crisis.
A study published in The Lancet used mathematical predictive models to test the preparedness and vulnerability of developing nations, especially African countries. Considering strong economic ties between China and many African nations, and the flight data available for travel following the outbreak and before the lockdown in China, Egypt, Algeria and South Africa had the highest chances of acquiring COVID-19, with a moderate to high capacity to manage the outbreak.
Nigeria, Ethiopia, Sudan, Angola, Tanzania, Ghana and Kenya were highly vulnerable and had varying modest capacities to handle the situation. By early March, the World Bank financed $12 billion on an immediate basis towards vulnerable countries to help them cope with the health and economic impacts of the COVID-19 outbreak.
The economic indicators are plummeting daily and the extent of the global damage is yet to be known or even to be estimated. Meanwhile, one can assess the impact on some sectors already affected by the outbreak.
For the MERS outbreak in Saudi Arabia during 2015, the estimated cost of managing a single patient averaged $12,947; however, no nationwide report was available. During the 2013–15 Ebola crisis, besides direct healthcare-related costs, 881 infections and 513 deaths occurred amongst healthcare workers. Healthcare workforce reduced by 8 per cent in Liberia, 23 per cent in Sierra Leone, accounting for 10,600 additional deaths due to untreated conditions attributed to loss of healthcare workers in Guinea, Liberia and Sierra Leone.
Amidst the COVID-19 outbreak, the finance ministry of China ensured that it would subsidise medical costs to those detected with the virus. However, the exact costs incurred are unknown.
On 24 January 2020, the family of an Indian schoolteacher diagnosed with coronavirus and being treated for respiratory failure, multiple-organ dysfunction and septic shock at Shekou Hospital in Shenzhen, China, requested the Indian Embassy for 1 crore Indian rupees ($136,000) towards her treatment.
This provides a glimpse of what the costs might entail and leaves little hope for individuals with limited financial security and insurance health covers. Meanwhile, Singapore has provided free masks to citizens, incurring costs of patients at public hospitals, excluding outpatient costs. Japan’s government provided free iPhones to all forcefully quarantined on the Diamond Princess.
South Korea provided free drive-through testing for all contact cases, which government officials duly tracked down using various forms of surveillance. India ensured that the first two tests for suspected COVID-19 cases would be provided free of cost for citizens.
By early March, the Chinese government allocated $16 billion towards fighting the outbreak. Singapore set aside $1.15 billion towards supporting the living costs of those affected by the outbreak and $575.7 million to front-line agencies battling COVID-19. The South Korean government allocated about $13 billion by end February towards the disease outbreak.
As Italy struggled to cope, on 8 March its government announced an $8.5 billion support package to deal with the outbreak, and in addition $900 million towards families and businesses directly affected by the coronavirus.
India approved a Rs 15,000-crore package to strengthen its healthcare to fight the coronavirus pandemic towards end- March. Iran requested IMF for $5 billion as their cases rose over 10,000 on 12 March. This came a week after IMF pledged $50 billion to low-income countries, assuring their member states that “people were not going to die because of a lack of money”.
In the US alone, by end February the US CDC has exhausted $105 million from the rapid response fund and has requested for additional $136 million to be transferred from other healthcare programmes towards coronavirus efforts. Of the $8.3 billion offered to Trump, $7.8 billion was towards various local and state health authorities dealing with the outbreak, and $500 million was set aside to promote telemedicine for the elderly at home. On 25 March, the US passed an additional $2 trillion economic stabilisation package to respond to the COVID-19 pandemic. Canada has released a 107 billion Canadian dollar relief package.
The WHO stepped in to equip fourteen countries, including Ethiopia, Nigeria and the Democratic Republic of Congo, to contain the virus and provide testing facilities. Around mid-February, the WHO also requested $675 million towards assisting vulnerable countries. To boost the preparedness of prevention and containment of COVID-19, the European Union sanctioned 232 million euros, including contributions towards the WHO funding, prevention in Africa, research, testing and protective gears.
However, it is rather premature to get a true picture of the healthcare costs and their impact on the global economy.
Excerpted with permission from The Coronavirus: What You Need To Know About The Global Pandemic, Swapneil Parikh, Maherra Desai, Rajesh M. Parikh, Ebury Press.
Swapneil Parikh is a practising physician in Mumbai and the co-founder of a healthcare start-up. Maherra Desai is a clinical psychologist and medical researcher. Rajesh M Parikh is the director of medical research and honorary neuropsychiatrist at the Jaslok Hospital and Research Centre, Mumbai.