Economic effects of Covid-19 in Luxembourg
First RECOVid working note with preliminary estimates
A note produced jointly by researchers from the Luxembourg Institute of Socio-Economic Research (LISER), the University of Luxembourg and the National Institute of Statistics andEconomic Studies of the Grand Duchy of Luxembourg (STATEC) within the framework of the Task Force set up by Research Luxembourg.
The socioeconomic aspects of this crisis are crucial for society. Epidemiologists and virologists have recommended home-quarantine measures and general lockdowns to slow down the spread of the virus and flatten the infection curve. These social-distancing measures have been perceived as necessary to avoid overloading hospital capacity and its tragic/ethical consequences. By preventing workers from working and consumers from consuming, lockdown measures are likely to lead to a severe recession. This being said, a vast majority of economists – who are sometimes criticized for developing dehumanized models – have unanimously supported these measures, placing human factors above all and defining the containment of the pandemic as the utmost priority.
In this note, RECOV id - a group of economists based in Luxembourg who join forces to assist the Task Force for the Coordination of the Public Research Sector in the Context of the Covid-19 Pandemic (Work Package 7 led by Aline Muller, CEO of the Luxembourg Institute of Socio-Economic Research (LISER)) - aims to rough out the subject and provide knowledge on the economic issues related to the Covid-19 crisis and to suggest plans of actions to mitigate economic damages from Covid-19. Yet, lack of hindsight and information available for research at present makes any forecasting exercise difficult.
This document provides a summary of ongoing research, proceed to back-of-the-envelope estimations of the “direct” economic impact of the health crisis and resulting policy measures, anticipate forces that may drive to a breakdown of the global economic system, discuss the policy options that are available to decision makers to mitigate the short-run costs and the risk of a systemic collapse, and provide suggestions for future research.