Covid-19 school closures will have have 'sizeable economic effects around the world'

School closures of even four weeks will have “sizeable” effects on economies and will weigh on the output of countries around the world, a leading economics consultancy has said.

Capital Economics in new research suggests that prolonged closures lead to significant effects on output. That’s because many working parents will be forced to stay at home to look after their children.

Closing schools in Ireland and in many other countries is the main response by governments as they try to control the outbreak.

The more women who participate in the labour force in economies, the greater potential hit to economics, Capital Economics said.

“The most important economic impact of this will be the direct reduction in output due to parents taking time off work to look after their children. There will also be a reduction in demand if workers get paid less as a result, although in practice employers and governments are likely to offer support to employees in this position,” said Vicky Redwood, senior economic adviser at Capital Economics.

She said spending at ceratain retail businesses such as cafes and gyms might suffer, “whereas people might spend more on food from supermarkets to eat at home”.

Between 15% and 20% of the workforce in the eurozone and UK “could need to take time off work to look after dependent children”, Ms Redwood said.

Useful information
• The HSE have developed an information pack on how to protect yourself and others from coronavirus. Read it here
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With up to a fifth of the workforce off during a schools shutdown for four weeks it “has the potential to knock 6% off GDP in that quarter, or 1.5% off annual GDP”, she said.

“The actual hit to annual GDP growth would be a bit smaller than this if workers made up some of this output when they returned to work and-or shifted the timing of their annual leave so they worked more later in the year instead,” Capital Economics said.

“Nonetheless, the potential effect of school closures seems sizeable and is one reason why we are reducing our economic forecasts further for many countries. We had already cut our forecast for global GDP growth from 2.9% to 2% and now a figure of more like 1.5% is looking likely,” Ms Redwood said.