It is a fundamental fact that anything organic that takes a negative hit, its sensitivity in the first stage must immediately adjust its performance by reducing its activity accordingly. It is then gradually adjusted and when a second or third negative hit is achieved the organic element is fully adapted and works effectively at the lowest levels of performance.
The same applies to the economy, which is also a living dynamic organism consisting of dynamic variables and indicators. The sensitivity shown in economic activity from the measures to deal with Covid-19 is beginning to decrease gradually compared to the first imposed total economic shutdown.
by Trust Economics-https://trusteconomics.eu
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The result is that as the recurring economic shutdowns increase, the economy has fully adjusted and economic activity has become “immune.” This finding appears in the improvement of specific economic indicators-variables such as unemployment, GDP and consumption indicators which achieve improved results.
In addition, the official GDP figures of the economy give us this picture, where the economy becomes immune to economic shutdowns. The main factors driving economies to improve after the lockdowns hit are:
- Less fear of citizens and because of the vaccine.
- Fully adapted government policy to the enforcement of lockdowns.
- The full adaptation of enterprises to the new environment.
In more detail:
1. Less fear of citizens and because of the vaccine
The first lockdown was the public’s great fear of the then unknown Covid-19 virus. Citizens’ concern that they may get a virus that is deadly and for which there is no medicine to be treated has also caused the greatest drop in consumption in certain economic sectors (the required lockdown in March 2020).
With the passage of time and the increase in information available to the public, people began to become more adaptable and of course less and less fear. This led them to move more while adjusting their consumption to higher than the original levels of the first global lockdown.
2. Fully adapted government policy to the enforcement of lockdowns.
Governments were also unprepared for the first economic shutdown without knowing what they were facing and what impact such a lockdown would have on economic activity and the economy in general.
Then, having specific measurements of the involved cost of lockdown both in the economy as a whole and in individual industries, they knew which economic activities should continue and which should not in the next and subsequent lockdown.
3. The full adaptation of enterprises to the new environment.
The sudden cessation of any economic activity was an unprecedented shock to businesses and especially to all those workers who worked in office jobs. From the first lockdown to the end of December, companies invested more and more capital to be more productive and under the conditions of lockdowns.
More laptops were purchased than desktops, more Wi-Fi connections were upgraded in employees’ homes and large sums were invested for the undisturbed use of tele-conferences, remote interactivity actions and video conferences.
Clubs and theatres as well as musical performances were now provided by the internet through subscription and restaurants have now been adapted to the home service of their customers.
So, the new adaptability of our economy has shown that the economy can and does have the capacity to absorb the shock of a pandemic and its response measures.
The adaptability of economic activity means less borrowing and fewer fiscal support packages from governments.
