Editorial: The economic pandemic pain is piling up, and it is yet to fully hit home

People mostly without face masks attend a demonstration against coronavirus restrictions in Berlin, Germany, on Sunday. Photo / AP

Editorial

Evidence is growing of the economic toll of Covid-19 beyond our borders, even as New Zealand has so far stayed afloat.

In the United States, negotiations are continuing in Congress to restore a key cash line going to millions made unemployed in the pandemic.

Millions of unemployed Americans at the weekend officially lost the weekly US$600 ($900) federal support that has helped them keep going. Unless Congress extends the scheme, many renters could face eviction from their homes if they cannot meet payments.

US President Donald Trump and Democratic and Republican leaders want an extension with the debate focused on the details of the package. Some Republicans in Congress want the US$600 reduced, Democrats want additions such as food aid, money for schools and the postal service. It would be the fifth US pandemic stimulus package.

The latest data shows the US economy contracted by 9.5 per cent between April and June or US$1.8 trillion in lost economic output, despite trillions of stimulus being pumped into it. That represents a 32.9 per cent fall overall for the year.

Unlike here, where getting the coronavirus under control gave the public enough confidence to return to spending after lockdown, the US is still in the thick of its outbreak although there are hopes for economic improvement in the third quarter.

Apart from a handful of states in the northeast, plus West Virginia and Michigan, all the rest are trending poorly or seeing uncontrolled spread, according to covidexitstrategy.org.

The Centres for Disease Control and Prevention projects a further 20,000 deaths from the virus this month.

The European Union is in a better position with the virus suppressed to much lower levels and individual countries fighting outbreak spot fires. EU leaders agreed on a 750 billion euro recovery fund. Manufacturing activity across the eurozone grew last month for the first time since early 2019.

Even so, the EU took a GDP punch of 11.9 per cent in the second quarter, after losing 3.2 per cent in the first. Spain, France and Italy have been hardest hit economically.

Public frustration with restrictions is rising, with thousands of mostly mask-less people attending a demonstration in Berlin, Germany.

In China, factory production has ramped up faster than domestic or international demand, according to the Wall Street Journal. The country had reported GDP growth of 11.5 per cent in the second quarter compared to the first.

Past epidemics have left long-lasting economic legacies.

According to World Bank data, countries that were badly hit by previous outbreaks had on average 9 per cent lower investment three years later than countries that escaped impact. Covid-19 has been far more damaging than the likes of Sars and Mers.

Countries around the world have tried with stimulus to cushion the blow of the pandemic, which has especially hurt the poor in both health and economic terms. Some business sectors have been especially burned. Worldwide air travel revenues are expected to fall by 50 per cent from 2019, the Economist reports.

Here, pushing the virus to the borders and Government financial support has kept our economy ticking over, although the tourism sector has been badly affected.

The impact of the economic pain overseas and our own closed borders has yet to fully hit home.