Covid-19 government policies: what is the impact on case numbers, economics and political popularity?

How strict has each government’s response to Covid-19 been?

Coronavirus has impacted everything from the way we shop to the ways we interact with each other. The high number of infections has meant that politicians have had to limit the dangers to public health, while limiting the damage to the economy and their popularity.

The responses of governments have been varied, and these different political approaches have caused huge swings in popularity. In many countries, the pandemic has caused what is known as a ‘rally-around-the-flag response’, in which government approvals rise as a feeling of national identity strengthens in crises. However, other governments have been widely criticised for their responses, causing fears over the next elections.

We’ve taken a look at the responses of seven governments to the crisis, comparing their strictness – using the Government Response Stringency Index⁵ – and the impact this had on the number of cases, gross domestic profit (GDP) growth and government approval ratings.

Take a look at each government’s response in detail:

• China
• Australia
• United States
• United Kingdom
• Spain
• Germany
• France

China

China was the source of the coronavirus outbreak – reporting a string of atypical pneumonia cases to the World Health Organization (WHO) on 31 December 2019. China’s political leaders were seen to downplay the risks of the virus, only implementing measures for travellers leaving Wuhan itself.

Once the illness was confirmed as Covid-19, the state introduced stricter measures, including international travel restrictions, social distancing measures, quarantines and restrictions on public spaces and transport.

In mid-February, China started to reopen some businesses and schools – although socialising and foreign entry remained restricted. As of 1 September, China has reported 85,066 confirmed cases, and just 4634 deaths on record – given the country’s dense population, this was seen as a good curtailing of the virus. However it’s important to note that due to China’s restrictions and censorship laws, it’s difficult to ascertain the real timeline of events, the government’s approval ratings or accurate statistics.

Despite this, China has the highest score on the Government Response Stringency Index, with a ranking of 81.94 out of 100. And since China opened its economy much faster than other countries, its real GDP growth had already rebounded by 11.5% in the second quarter (Q2) 2020.

Australia

The first case of coronavirus in Australia was confirmed on 25 January. Australia’s initial response was to suggest that only those who had direct contact with an infected person should be quarantined.

In the following weeks, stricter policies were introduced. This included a ban on foreign arrivals from China and a 14-day self-isolation period for other travellers, as well as social distancing measures and closing non-essential businesses.

Despite the firmness of the government’s approach, the country has seen over 26,000 cases. This was largely due to a second wave of cases in Melbourne, Victoria following a relaxation in restrictions. But the speed and efficiency at which the government introduced localised measures contributed to Australia achieving the second highest strictness score – 79.17 out of 100.

The government’s approval ratings rose steadily throughout the initial lockdown, but a poll showed areas such as Victoria were less than impressed with the localised measures – causing a decline of 5% between May and August.

Australia has been less impacted economically by Covid-19 than most of the other countries on our list. However, it still experienced its largest GDP fall since records began in 1959, with figures of -7% in Q2 2020 placing the country firmly in recession territory.

United States

The US recorded its first case of Covid-19 on 19 January 2020 and has since exceeded 6.09 million cases and 190,000 deaths. This is largely due to the delay in government response and inconsistencies at a state level.

Initially, US President Donald Trump downplayed the impact of the virus, even going so far as to claim it was a hoax from his political rivals. It took until mid-March for the government to launch its social distancing campaign.

By the end of July, all US states had started to reopen the economy, but the progress has varied from state to state. For most, there are still restrictions governing indoor entertainment, restaurants and bars, as well as the need to wear face masks in indoor spaces.

The US was rated 67.31 out of 100 on the Government Response Stringency Index, but at a federal not a state level. This is a clear example of where the index does not represent efficiency, as the US has been widely criticised for its inconsistent response – with by far the largest portion of cases per capita (1.8647%) and the largest fall in GDP (-31.7%).

Before Covid-19, in early December 2019, President Donald Trump had a general approval rating of 42.7%.⁶ His approval rating did rise to 45.5% in late March – coinciding with a $2.3 trillion coronavirus relief package. However, after Trump falsely claimed that he was ‘earlier’ than any other leader in putting social distancing measures in place, his ratings slumped by 2% again. This wasn’t helped when a retrospective study by the University of Columbia found that 36,000 lives could have been saved in the US if the government had implemented social distancing measures just a week earlier.

United Kingdom

The first official case of coronavirus in the UK was on 31 January 2020. The initial government response was to promote hand washing and enforce an isolation period for travellers returning from Wuhan. By the end of February, 23 cases of Covid-19 had been recorded in the UK.

In mid-March, the first social distancing measures were introduced, preventing non-essential contact and encouraging working from home. Shortly after, schools were closed and the country went into a full lockdown – with no access to public spaces including pubs, restaurants, theatres or gyms.

On 5 May, the UK death toll hit 29,427 and the country became the highest affected country in Europe and the second in the world. However, the same week the UK government announced it would start to ease lockdown in England. This was mainly to encourage economic stimulus but the UK economy has still experienced the second largest GDP decline on our list (-20.4%).

Overall, the UK scored 64.35 on the Government Response Stringency Index – however, Scotland, Ireland and Wales all had drastically different (more cautious) approaches than England but were not ranked separately.

Prime Minister Boris Johnson’s ratings fell as his response was labelled confusing. While the government initially enjoyed the public trust in his handling of the crisis, by September it had one of the lowest domestic approval ratings in the world. In contrast, Scotland’s first minister, Nicola Sturgeon, had a spike in popularity thanks to her stricter response.

Spain

Spain has been heavily impacted by the Covid-19 outbreak – with over 543,379 cases and 29,628 deaths. The first recorded case was on 31 January and cases increased rapidly until late March. This led to the government declaring a state of emergency and implementing a range of measures, including: regional lockdowns, bans on international travel and stay-at-home measures for non-essential workers.

The majority of Spaniards approved the containment measures causing a 14% rise in Prime Minister Pedro Sanchez’s popularity between March and June.

The state of emergency was lifted on 21 June, allowing movement to resume both domestically and internationally. Social distancing requirements did remain in place, as well as mandatory face masks, but a massive influx in tourists from other countries caused severe local outbreaks throughout July and August. These outbreaks did cause a decline in government popularity by 5%.

Research conducted found that Spain had reported roughly 131 new Covid-19 cases per 100,000 people in early August – which is far more than any other country. It’s unsurprising then that Spain has a lower score on the Government Response Stringency Index – 62.50 out of 100 – and has experienced a significant decline in GDP.

Germany

Germany registered its first case on 27 January 2020 and by the following month had 26 confirmed cases. A national crisis management group was set up on the 27 February and the next day travel from all high-risk areas were monitored.

Germany’s containment policies included border and school closures, restrictions on non-essential businesses and social distancing requirements.

On 20 April, following a steady decline in cases, the German government chose to reopen shops and schools gradually – with social distancing measures still in place. However, after relaxing it’s measures, cases surged in Germany due to people returning from holidays in August.

Germany only scored 59.72 out of 100 on the Government Response Stringency Index – as it had no stay-at-home measures and no public transport restrictions. However, the government is widely believed to have a successful response to the virus – with just 9345 deaths out of 256,433 cases – and a comparatively small decline in GDP (-9.7%).

France

France experienced one of the world’s worst outbreaks of Covid-19 – attributed to an unprepared health care system and a slow government response.

Despite the first cases in France being recorded on 24 January, it took until March for any action to be taken. The government introduced a range of measures in mid-March to reduce the spread of the virus, including school closures, working from home for non-essential businesses and a ban on non-essential activities and outings.

France experienced a steady decline in cases throughout April, so the shutdown ended on 11 May. Although there were doubts over the government’s handling of the crisis, Emmanuel Macron’s approval rating surged to a two-year high of 48% in June.

However, the infection rate did rise again in August in localised clusters as people started to take less care with protective measures, which caused Marcon’s approval rating to slump by 10%.

France scored lowest on the Government Response Stringency Index with a rating of 43.52 out of 100 – losing points for the slow response and complete lack of restrictions on public transport and international travel.

Conclusion

Looking at the data we’ve compiled, there is no definitive relationship between the policy responses of governments and other factors such as the number of cases, GDP growth and popularity. This is largely due to inconsistencies in the data recorded by each country but also the differences in approach that have made any side-by-side comparison difficult.

It’s also important to note that the index is only a record of the number and strictness of policies, not their effectiveness – which is why the index’s scores don’t necessarily correlate to fewer cases per capita and economic resilience.

What is clear, however, is that the popularity of a government had a more direct relationship with GDP growth than with the strictness of coronavirus policies. Countries that saw a smaller decline in GDP growth had an overall higher approval rating of the government, while countries – such as the US – who had a larger fall in GDP, had a much lower approval rating.

This implies that the impact of coronavirus on the economy had far more sway over government popularity than the strictness of response.

If you want to take a position on whether a national economy will rise or fall, you can do so by trading indices via CFDs. For example, the Hong Kong 50 is used as a proxy for the wider Asian market.

Footnotes

1 Government Response Stringency Index as of 9/9/2020
2 Our World in Data as of 9/9/2020
3 TradingEconomics.com, 2020
4 YouGov, 2020
5 University of Oxford, 2020
6 FiveThirtyEight, 2020