Finance & economics
The global economy
A good kind of bubble
As some countries contain the virus more successfully than others, could travel zones offer a route to economic recovery?
It may be a painful fact to contemplate during these locked-down days, but last year the world was more mobile than ever, with people taking 4.6bn flights.
In April this year, though, planes carried just 47m passengers; that level of mobility, annualised, would set the clocks back to 1978.
The virtual halt to travel has exacerbated the global economy’s woes, complicating trade ties, upending business and devastating the tourism industry.
Little wonder that governments want to restore links.
An idea gaining favour is the creation of travel “bubbles”, binding together countries that have fared well against the coronavirus.
A closer look yields some grounds for optimism.
The Economist has identified potential bubbles that account for around 35% of global GDP, 39% of all trade in goods and services and 42% of the world’s spending on tourism.
But the challenge of connecting them also underscores how hard restarting the global economy will be.
Simply returning borders to pre-virus days is, for now, inconceivable.
Many health experts, first critical of travel restrictions, have come to view strict controls as useful, especially for places that have contained local infections.
“Every inbound case is a potential seed that can grow into an outbreak,” says Ben Cowling, an epidemiologist at Hong Kong University.
The first bubble is due to come to life on May 15th between Estonia, Latvia and Lithuania, among Europe’s best performers in taming the virus.
Their citizens will be free to travel inside the zone without quarantine.
The next might be a trans-Tasman bubble, tying New Zealand to Australia’s state of Tasmania, both of which have kept new cases down.
China and South Korea have launched a “fast track” entry channel for business people.
“My expectation is that there will be a large number of small travel bubbles,” Mr Cowling says.
But in the same way that regional trade deals are more efficient than bilateral pacts, the economic benefits from making the bubbles bigger would be greater.
Based on an analysis of infection data, The Economist sees two large zones that could emerge as bubbles, subsuming the smaller ones that are now being formed.
The first is in the Asia-Pacific region, where countries from Japan to New Zealand have recorded fewer than ten new infections per 1m residents over the past week.
The second is in Europe: using a laxer threshold—fewer than 100 new cases on the same basis—the bubble could reach from the Baltic to the Adriatic, and take in Germany.
Our AsiaPacific bubble would, thanks to China and Japan, account for 27% of global GDP.
Our European one would make up 8%. One measure of the potential value of the bubbles is their degree of trade integration, showing whether the economies are complementary.
For the countries in our Asia-Pacific bubble, an average of 51% of their overall trade is with each other.
In our Baltic-to-Adriatic bubble, it is 41%.
Small countries would gain the most by reconnecting with larger neighbours.
Free movement would be especially helpful for countries such as Thailand and Greece that rely on tourism.