Coronavirus Threat and Lockdowns: Which Countries can Afford Them and for How Long?

All across the world, the countries are dealing differently with Coronavirus pandemic scare. But, the most popular and common strategy is ‘lock down’. But does the country-by-country Govt’s proactive stance is dependent on threat perception? When we analyse our country-by-country sentiment scores for our news collection, we find that there are significant differences in the tone and frequency of Coronavirus related news flow. But what is even more surprising is that some of the countries which are still nowhere close to the disastrous impact some others have seen, are still more scared.

We agree that we are using the word “scared” loosely. But what we really measure is the negativity of news flow. While it would be big surprise that the two countries at different threat perception has not much difference in their Coronavirus factual report card, but the bigger questions are, a) Are some countries overconfident and suffer as a result such as USA, Italy or Brazil, b) Some others are worrying unnecessarily, for example Turkey or Japan, c) Are there countries which have relaxed the lock down stipulations too early such as Germany?

Fig. 1: Average Sentiment for Coronavirus (EMAlpha Country-by-country Sentiment)

This could be because of multiple reasons such as, a) the countries may worry more when they are relatively less developed and where the healthcare infrastructure is in poor shape. When people know that even a mighty superpower like USA has struggled to meet even the basic healthcare needs of what Coronavirus pandemic demanded, the excess worry seems rational, b) the people in some countries respect the authorities a lot more and sometimes this is not even by choice because several countries adopted draconian measures to make sure that people comply with lock down guidelines, something which is not possible in most developed countries.

Apart from it being a healthcare emergency, the Economic cost of Coronavirus pandemic is staggering. What is hurting almost equally and even more is the cost of lockdown and the tragedy is that this cost will be borne more by the segment which can afford it the least, the poor people like daily wage laborers and workers in unorganized segment. Two questions are still unanswered. The first is that just how much worry is rational and when you worry less than you should, you become careless and at the same time, when you worry too much and more than you should, you lose out on opportunities.

The second is that does a country’s ability to afford a lock down depend on its economy, both size as well as wealth distribution over the population? What does this mean, a) A rich country can afford a lock down for longer than a poor country, b) a rich but with high wealth distribution inequality can afford it less than an equally wealthy (or even less wealthy) country which has more equality. But the threat perception doesn’t follow these rules and so does Govt’s response. The Govt policy on lock downs will be determined more by threat perception than the ability to afford it and that is where the problem lies. But unfortunately, there are no easy answers and no easy solutions on this.

Research Team
EM Alpha LLC

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About EMAlpha:

EMAlpha, a data analytics and investment management firm focused on making Emerging Markets (EMs) accessible to global investors and unlocking EM investing using machines. EMAlpha’s focus is on Unstructured Data as the EMs are particularly susceptible to swings in news flow driven investor sentiment. We use thoroughly researched machine learning tools to track evolving sentiment specifically towards EMs and EMAlpha pays special attention to the timely measurement of news sentiment for investors as these markets can be finicky and sentiment can be capricious.Our team members have deep expertise in research and trading in multiple Emerging Markets and EMAlpha’s collaborative approach to combining machine learning tools with a fundamental approach help us understand these markets better.

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