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Webcast Replay: COVID-19’s Economic Impact


Across the country, states are starting to lift stay-at-home orders, but that does not mean the US will immediately return to normal. Instead, people and businesses should expect lasting changes and a possible second COVID-19 wave later this year, according to participants in the seventh webcast in Marsh’s continuing series on the COVID-19 pandemic.

Sergio Rebelo, MUFG Bank distinguished professor of international finance at Northwestern University’s Kellogg School of Management, noted that there are three possibilities for the COVID-19 pandemic to end. One option, that requires a degree of luck, is that the virus mutates and becomes less lethal. A second option is the discovery of an effective vaccine or treatment, although he cautioned that this is likely to take time. Another exit would be for enough of the population to be exposed to the virus to acquire herd immunity, which was how the notorious 1918 flu pandemic ended.

However, data from New York City – one of the worst-affected areas – shows that we have a way to go before herd immunity is achieved. And if restrictions are lifted prematurely, it is likely to lead to a second wave that is much worse than the current one. “That’s why we have to proceed very carefully, keep track of the data to see how well we’re doing, and perhaps close again if things don’t go well,” Rebelo said.

Rebelo highlighted the importance of preparing for multiple waves, especially given the uncertainty that remains about immunity among those who have already been infected. However, instead of the strict measures that have been in place for the last several weeks, governments should move towards smart containment through widespread testing and quarantining of infected individuals, which should also help reduce the negative effects on the economy.

Those economic implications could be significant, Rebelo said. We are seeing a huge shock to an economy that is already in a fragile state. Recessions tend to last for a year and bottom out after six months, Rebelo said, which means the bottom of the recession should hit this summer. Full recovery, however, will not take place until a vaccine is available, particularly due to the effect of the pandemic on the travel and hospitality industries, which will be the last to recover.

The pandemic will lead to significant changes for people, specific industries, and the overall economy, Rebelo said. These include the acceleration of digital transformations, an increase in remote work, an explosion of e-commerce, and the reshaping of supply chains.

As states ease stay-at-home orders, Daniel Kaniewski, a managing director within the public sector team at Marsh & McLennan Advantage and a former deputy director of the Federal Emergency Management Agency, noted that public officials must balance economic priorities with public safety needs. Because different local authorities will take different approaches, we will be able to see what works best, which could provide helpful insights during a second wave.

Kaniewski stressed that individuals have an important role to play by adhering to social distancing guidelines, wearing masks, and practicing good hand hygiene. “That not only helps prevent us from getting sick, but it also helps prevent the virus’s spread,” he said, adding that nonprofits and the private sector have crucial roles to play as we start the road to recovery.

Dr. Lorna Friedman, Global Health Leader within Mercer’s Multinational Client Group, stressed that as workers start to return to physical workplaces, employers must ensure their people feel they are returning to a safe and healthy environment. Dr. Friedman said employers need to establish return-to-work processes that are appropriate for their circumstances and adjust and refine them as necessary. Employers should clearly define who needs to be physically present in the workplace, communicate clearly with their people, evaluate the value of different health screening options, and take steps to maintain their employees’ privacy and confidentiality.