Are there any COVID winners?

02 October 2020

Following recent speculation on New Zealand’s COVID performance in comparison to other countries, we looked at the data in detail.  While New Zealand is definitely not “world-leading” (that title needs to be given to East Asia), we have done a better job than any other Western country of balancing the economic and health impacts of this horrible pandemic!

 

Following the recent press articles comparing New Zealand’s COVID response with other countries, we tried to analyse the data to see if there is any way to judge countries’ responses to the crisis. 

It is a challenging exercise as there are two entirely separate axes for looking at a country’s response – the economic impact and the health impact. The sacrifices required to deliver a better health impact often drive a worse economic impact. Finding an optimal balance between these two factors is a challenge that Western Governments’ have found difficult to achieve.

The data is surprising, it shows direct links between economic performance and health outcomes are tenuous. East Asia is the clear winner as several Asian countries managed to achieve great health outcomes and great economic outcomes simultaneously.

For western countries, there is no clear relationship between economic and health successes at fighting the pandemic. Other factors such as reliance on tourism, the stringency of lockdown and the ability to provide additional fiscal stimulus are greater drivers of economic outcomes than the health impact on its own.

Whilst not as successful as East Asian counterparts, New Zealand appears to have done better than most other Western countries in balancing the health and economic outcomes. We have one of the best health outcomes in the world and we have remained in the top quartile for economic outcomes, despite having an over-reliance on tourism, this is something that we should all be proud of.

 

The Health Impact

We looked at deaths per 100,000 of population. The number of cases and fatality rates is largely a result of testing, therefore in our view, death rates are a more reliable source. While there are discrepancies on how deaths are being measured, it is not reliant on testing as other measures are.

Deaths per 100000 people in population

Source:  John Hopkins University. Data taken on 29 September 2020

Looking at the data, there are some interesting trends and facts to point out:

-         East Asian countries have had significantly better health outcomes than other countries, largely as a result of mobilising quickly with strong testing and contact tracing infrastructure in place. There was infrastructure introduced during the SARS pandemic in 2003 which assisted.

-        Western countries had significantly higher death rates. This is the first pandemic faced by many countries for over a hundred years so the infrastructure was not in place to deal with the pandemic. To further exacerbate the issue, countries could not decide on how to balance the economic versus health impacts which led to slow and at times weak decision making. 

From a health perspective, there is no doubt, New Zealand has done exceptionally well with 0.56 deaths per 100,000 population, the lowest Western country.  The next best Western country is Uruguay with a death rate almost triple that of New Zealand at 1.36.

 

The Economic Impact

To assess the economic impact we looked at how much lower 2021 GDP is expected to be now compared to at the start of 2020. We used this measure to normalise for where individual countries are in their outbreaks and remove noise that short term Government stimulus might have created in the numbers.

Expected GDP decline compared to previous forecast 2019 2021

Source:  Factset consensus forecasts – data compares forecast 2021 GDP as of 30 September 2020 with GDP forecast as of 31 December 2021

All economies are expected to end 2021 with a significantly lower GDP than pre-COVID estimates. Globally GDP is expected to be more than 5% lower – and this will have an impact on everyday life for people. It will mean higher unemployment and already stretched Government budgets will be even more stretched making it harder to maintain Government spending programs. 

Surprisingly, there is not a strong link between the economic impacts of COVID-19 and health impacts. This shows that Government actions around Fiscal Stimulus, Lockdown stringency and the strength and shape of the economy have all been important factors in driving economic outcomes.   

Countries with a significant reliance on travel and tourism have been hit particularly hard. Countries such as Thailand, Vietnam and Spain all have tourism making up 15-20% of their GDP and these industries are likely to be shut down for the better part of 12 months.

 

Our conclusions – are there any COVID winners?

It is important to point out there are no COVID winners. The health and economic impacts of this pandemic will be felt by all 7.8 billion people in the world. Very few people have not had their daily life disrupted.

Though, there are clearly clusters of countries that have managed the pandemic better than others. 

-         East Asia has fared best. This is largely as a result of tighter control of populations by governments and systems in place for dealing with pandemics following their run-in with SARS in 2002. Countries such as Taiwan, Vietnam and South Korea had contact tracing, testing and isolation processes in place quickly which avoided the need for lengthy nationwide shutdowns and have managed to combine great economic and health outcomes.

-         A select group of European countries (Italy, France, Portugal and Spain) had terrible health and economic outcomes. These countries have  limited ability to provide additional stimulus measures and are heavily reliant on tourism which has effectively been shut down

-         Northern Europe has not had a great crisis from a health outcomes perspective, with most countries in the bottom quartile for deaths. However, most of the region is in the top quartile for economic performance.  This can be attributed to their relatively loose lockdowns, low reliance on tourism and the ability to provide additional stimulus to their economies.  

-         The United States is an anomaly in that it has one of the worst health outcomes but is in the top quartile for economic impact. This is largely a result of the significant fiscal stimulus package and the relatively relaxed lockdown and the very small reliance on international tourism.

Unfortunately, there are no clear conclusions for us. Countries have struggled to balance the health and economic outcomes Based on how other countries are performing, we think we should be proud in New Zealand of how we have tackled this pandemic. The data shows we have done an admirable job of balancing the economic and health impacts.

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