What can we learn from Asia’s pandemic?

Before considering learning points from Asia’s pandemic, there are firstly some “false truths” to be dispelled. The main one of these is that as Asia was first in (to the outbreak), so it will be first out.

This is wrong on two levels:

• China, South Korea and Japan may have been the first three countries to register 100 confirmed cases, but the first 20 countries to reach 100 confirmed cases are dominated by Europe (see chart).
• Of the early Covid-19 movers, some (Singapore and Japan), are still only mid-way through their own outbreak.

More importantly, what we have learned can be summarised by the three statements below. These are generalisations, and there are exceptions. But they are good working rules and most likely hold true for other parts of the world too:

1. Lockdowns work
2. Lockdowns hurt
3. There was an alternative

Neither South Korea nor Taiwan endured a mandatory lockdown (Hong Kong too, though it has other problems). Taiwan was quick to close its borders and impose quarantine. Together with tech-based tracing and extensive testing, kept the outbreak from ever gaining a serious foothold.

There was an alternative for almost any developed economy with a sufficiently advanced biotech industry and access to social distancing and tracing apps

South Korea was a little slower off the mark, but it too responded to its outbreak with aggressive testing, tracing and isolation. Korea quickly ramped up its testing capacity to front-run the virus, not just to respond to outbreaks.

So, there was an alternative for almost any developed economy with a sufficiently advanced biotech industry and access to social distancing and tracing apps. But it had to be employed very early. Instead, most economies outside Asia assumed Covid-19 was an Asia-only disease until it clearly wasn’t.

So our learning point, that there was an alternative seems to be overtaken by the more realistic learning point that, “given the opportunity to procrastinate, most countries will do so”.

Practically all of Asia is under some form of lockdown now or has been under some form of lockdown. What we observe is that countries that implemented their lockdowns early, and fully, saw their new case counts peak quickly, and were able to begin the process of reopening more quickly. In this group, we would place Australia and New Zealand alongside China.

All three countries have now eased movement restrictions and we are seeing a slow resumption of economic activity.

In Asia, lockdowns seemed to work most effectively when they were implemented rigorously and in the early stages of an outbreak. When implemented gradually, they simply chased the outbreak higher, or if regionally, chased it geographically, taking longer to bring outbreaks under control.

Although we can’t really make any qualitative assessment just yet, mainly due to the different timing of different country’s outbreaks and lockdowns within 1Q20 and 2Q20, there are a few observations that we can make.

Quarter-on-quarter seasonally adjusted GDP growth for China, Korea and Taiwan was all negative. For Korea, it fell 1.4%, Taiwan fell 1.5%, China fell 9.8%. That’s quite a difference. We also have preliminary GDP for Singapore, which was down 2.2%, though, in 1Q20, Singapore only had soft social distancing.

Cumulatively, once we add in the big losses for 2Q20, the losses in this group are likely to be more than those for China (and of course Australia and New Zealand) although the pain has been spread over several quarters.

So refining our earlier learning points:

• Lockdowns work, but result in a smaller cumulative loss of output if done early and fully
• There is an alternative, but only if you are quick