Written by Laurence Todd, Research Director of IDEAS
Scientists and government are working together to fight the virus – now economists and government must work together to protect society from the controls that could go on for months
- The central trade off policy makers are facing is how much to restrict activity to reduce the rate of infection.
- The Malaysian government’s decisive action to restrict movement should reduce infection but will likely need to be extended and repeated over the coming months.
- We need to develop policies and tools to support the economy given that restrictions are set to continue.
As we all face our first weekend under the Movement Control Order (MCO), many Malaysian families will be apprehensive of the future and wondering how long this will go on. One advantage we have is that we can look to experiences and analysis from other countries to guide us. So what might Malaysia’s journey look like? This situation is unprecedented and evolving fast – even the most expert epidemiologists are working in a fog of partial detail. But there is analysis starting to emerge which can help us develop policy tools to mitigate the economic and social impacts of the crisis here in Malaysia.
The central trade off policy makers are facing is how much to restrict activity to reduce the rate of infection. On the one hand, restricting activity will impact the economy, putting people out of work and forcing businesses to close. On the other hand, allowing the infection rate to spiral out of control will quickly overwhelm health services and lead to many deaths. Different governments are choosing to strike this impossible balance in their own way depending on local factors – the capacity of the health system, the willingness to take tough, even oppressive measures, and the availability of resources to mitigate the economic impact of such measures. One thing is common to all: there are no easy choices.
Suppression vs mitigation
To support UK policymakers, researchers at Imperial College London have analysed the likely path of infection in response to different policy approaches. The shaded area of the graph shows the period during which two different strategies are adopted: suppression (the green line) and mitigation (the orange line).
Suppression strategies (such as the stricter measures being imposed in China, South Korea and now Malaysia) more quickly reduce the rate of infection and brings the number of cases down to more manageable levels. But, once the measures are lifted, the situation could again quickly spiral if new cases emerge. In comparison, a lighter touch mitigation strategy (more like the UK), leads to more cases in the short term but means there is a lower spike when the measures are lifted.
So, what does this tell us? Firstly, that suppression can work in the short term – and this has been borne out in China and South Korea. But countries will need to be ready to reapply the measures at short notice and continue testing on an enormous scale to sport any re-emergence. It is probably too soon to asses if the mitigation strategy will follow the path the researchers predict. We will need to keep watching the UK situation closely.
What are the lessons for Malaysia? The MCO announced by the government on 17th March is closer to the suppression end of the spectrum and is expected to creep up in severity over the coming week. The good news is that Malaysia is doing so earlier in its infection journey than China and Korea, and so the infection might burn itself out more quickly (see chart below from John Hopkins). But the measures in China were likely more severe than ours and it took much longer than two weeks to “bend the curve” in both China and Korea.
While some extension in the MCO is therefore likely, hopefully the government in Malaysia acted decisively to avoid needing restrictions in place for multiple months as was necessary in Wuhan. But – even if it does bring the situation under control – the ICL analysis suggests that we will need to be ready to reapply the restrictions, as cases re-emerge. And they will re-emerge – even if we got to a stage of being virus-free, Malaysia cannot keep its external borders completely closed indefinitely. This is why it is so important that we have an extensive testing regime. It will enable us to detect new cases quickly, allowing the government to apply strict quarantine protocols on those infected and their contacts. Then, next time, we will again be ahead of the curve when we need to apply the MCO.
If this is the future – an on-again-off-again MCO with an intensive testing regime – what does that mean for the country’s economic policy? The government’s highest priority must be to do everything possible to mitigate the economic, financial and social impact of the MCO. The measures announced to support SMEs are positive, but more will likely be needed (see my other post). One of the challenges, for example, is distributing support to those who really need it and doing so in time to prevent them going under. Many SMEs do not take loans from banks, or even in some cases have bank accounts, so distributing assistance support through financial channels may be slow to take effect.
But just as we need to test to track the spread of infection, we also need to track and respond to the economic impact of the MCO. We need to understand where the economy is being most hit – the individuals and firms that are bearing the brunt of the restrictions, and the effectiveness of our tools to reach them. It is my sincere hope that the government will make available all the data it can to aid policy makers in and out of government to refine the tools we need to mitigate the economic costs of the measures being taken to keep the crisis under control. I would also urge everybody to complete surveys being undertaken by academics trying to get a handle on the problem. We have seen an unprecedented health response but we also need a national effort to improve economic policy making if we are going to successfully navigate this crisis. One thing is clear despite all the uncertainty – we will be in stormy and uncharted waters for months to come and we must all work together if we are to reach port as quickly and safely as we can.
 Chart taken from https://coronavirusgraphs.com/?c=da100&y=log&t=line&f=0&ct=&co=1,53,116,125,141