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Tracking the Global Impact of the Coronavirus Outbreak

The Situational Threat Report Index from Bain’s Macro Trends Group combines official data with our own modeling to evaluate the Covid-19 outbreak’s effect on global business.

  • March 31, 2020


Tracking the Global Impact of the Coronavirus Outbreak

Bain Macro Trends Group analysis of the global Covid-19 outbreak suggest that businesses should activate first-level contingency procedures that include mitigating immediate threats to staff, such as restricting nonessential travel to avoid stranding travelers due to quarantines; reviewing and even deferring nonstrategic investments; and planning for a business environment that’s equivalent to a quarter-of–a-year recession.

The Situational Threat Report (SITREP) Index is a composite assessment based on all available information about epidemiological, economic and social conditions tied to the outbreak (read “About the SITREP Index” below). On March 12, Bain raised the SITREP Index to Level 6.

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The latest on the outbreak

As of March 31, there were over 800,000 confirmed cases of Covid-19 around the world and over 40,000 fatalities. The US now has over 170,000 cases, more than any other country (including China), and healthcare providers and local officials across the nation warn they face shortages of critical medical equipment. Western Europe continues to grapple with a severe outbreak—Italy and Spain have a combined total of more than 200,000 cases—and the per capita death rate in the European Union is almost nine times the rate in the US.

While the virus’s epidemiological trajectory remains uncertain, governments have implemented aggressive efforts to slow transmission. France, Spain, Germany, Belgium, the UK and India have all followed Italy’s lead, implementing various types of national lockdowns. State and local governments in the US have closed schools and banned both public gatherings and eat-in dining; many have also issued strict shelter-in-place or stay-at-home orders requiring nonessential businesses to close and residents to avoid leaving their homes unless necessary. Countries across the globe have closed their borders and announced travel restrictions. New data from the earliest outbreaks in the US indicates that social distancing can slow the virus’s spread even outside East Asia, a hopeful sign for the many countries and regions that have implemented such measures.

The sizable economic effects of the pandemic are becoming apparent. Data from China indicates the virus resulted in a 20% GDP decline in the first two months of 2020; other countries forced to implement aggressive social distancing will likely experience similar effects. In the US, nearly 3.3 million workers filed for unemployment benefits in the week ending on March 21, breaking a decade-long streak of job growth and shattering previous records.

The global economy now faces two threats. If governments around the world fail to slow the virus’s progression or relax social-distancing measures too aggressively, the human toll and economic effects will be significant. Furthermore, the pandemic is jeopardizing the stability of the financial system. Falling oil prices, due to both the pandemic and the price war between Russia and Saudi Arabia, have placed further stress on the economy, especially the high-yield corporate debt market.

The Federal Reserve and the European Central Bank have launched an unprecedented effort to prevent a liquidity crisis that could jeopardize the entire global financial system, but fiscal stimulus measures are almost certainly needed to stabilize the macroeconomy. Legislators across the developed world have promised to deliver economic relief, and many have already done so. France and Germany have both announced large stimulus packages, and in the US, President Donald Trump signed a $2 trillion bill on March 27.

Looking ahead

The Situational Threat Report (SITREP) Index is likely to increase further as aggressive social-distancing measures are implemented and extended in more countries. New research indicates these measures may be required for much longer than many are expecting, and the economic and financial damage from maintaining these disruptions will grow geometrically over time. The duration of these disruptions will be an important determinant of the pandemic’s ultimate economic effects. Considerable uncertainty remains, however, about the duration of these measures, which is why we are not yet raising the index to level 7 on a scale of 10. We still anticipate raising the index to level 7 by early April if the situation continues on its current trajectory.

Since we first published the index in February, observable patterns have helped resolve some unknowns, but significant uncertainty still surrounds other critical determinants of the virus’s ultimate effects. We originally constructed the index to encompass the broadest possible range of potential developments across three dimensions: the epidemiological progression of the virus, governments’ policy responses to the pandemic, and the epidemic’s macroeconomic impact. We believe that our original range (from 0 to 10) still encompasses the full range of possible outcomes.

Encouragingly, developments along all three dimensions have reduced the likelihood we will ever reach the uppermost range of outcomes. That said, we remain cautious about ruling out more extreme possibilities in a situation as multifaceted and fluid as the global Covid-19 pandemic.

In light of our evolving understanding of the contours of the pandemic, we are making minor clarifying adjustments to the descriptions of the index’s upper levels (7 through 10). These adjustments have not changed the meaning of those levels, nor do they imply a change to the relationship between the index level and recommended business response.

We believe these changes enhance readability and transparency about how we are calibrating judgments on the current global situation surrounding the pandemic. Specifically, the language now focuses more on the macroeconomic impacts, although these effects are intertwined with both government policies and the epidemiological situation.

To provide additional context, we also offer the following commentary about the two sets of ranges in the upper part of the index:

Levels 7 and 8 imply that enough macroeconomic damage has occurred or is likely to occur to transform a one-time shock into a more severe, broad-based, multiquarter recession comparable to other severe recessions since World War II. In particular, if solvency-risk concerns spread beyond the initial set of frontline industries most directly impacted by social distancing, the resulting economic contractions are likely to be more severe and long-lasting.

Levels 9 and 10 imply that macroeconomic conditions are adverse enough to produce business failures far beyond the scope of typical contractions, unless governments implement adequate backstops. For example, if governments mandate extremely strict social distancing for over a year, many normal market activities would likely be severely impaired.

We continue to maintain the index at Level 6 at this time. Barring unexpected developments, we will consider raising the index to Level 7 in early April, but offer no prejudgments about the likelihood of an increase at that time. We are closely monitoring several factors that will affect the pandemic’s course: the progress of disease-mitigation efforts in places like Italy and Washington state, which provide useful information about how much distancing is required to achieve stabilization; fiscal and monetary policy initiatives to address the macroeconomic damage resulting from the pandemic; and emerging treatment protocols, which could change the epidemiological facts of the virus.

Rationale for raising the index to level 6

We raised the index from level 5 to 6 on March 12, 2020.

A rapid increase in the number of businesses in Western Europe and the United States announcing various measures to combat the spread of coronavirus was an especially prominent factor in our decision to raise the level at that time. In particular, many large employers moved to partial or full work-from-home policies. Countless prominent public events were canceled throughout the US and Western Europe due to a combination of governing authority declarations and private business decisions.

The other critical factor in our decision was the apparent insensitivity of the US financial markets to sizable emergency Federal Reserve interventions. Two weeks earlier, it seemed likely that breaks would appear in the financial system, but they were not yet present. The week of March 12, these breaks were present, but still nascent.

Additional data from our Bain/Dynata survey of US households indicated that almost one-in-five Americans took at least one concrete action the prior week, such as avoiding public spaces like restaurants and theaters, due to their concerns about the coronavirus. Anecdotal reports of changing public behavior have spiked, and a midweek snapshot of real-time polling suggested the level of behavior change by concerned individuals was increasing.

Finally, the quickening pace of announcements that prominent public figures had been exposed to or may be infected with coronavirus—including possible exposures among members of the US Congress and the possible infection of Prime Minister Justin Trudeau of Canada and Health Minister Nadine Dorries of the UK—were likely mobilizing portions of the population that had previously viewed the coronavirus pandemic with more circumspection. Particularly for democratic countries, this upward inflection in public perception about the urgency of the coronavirus pandemic was a critical development on the path to a more intense phase of the crisis.

Rationale for raising the index to level 5

We raised the index from 4 to 5 on February 25, 2020.

A key milestone was a notable inflection in the official guidance from the Centers for Disease Control indicating rising certainty that Covid-19 would become a large-scale epidemic in the United States and result in serious disruptions to daily life. The CDC’s guidance further indicates that the epidemic was progressing to the point at which the need for public preparations now outweighs the risk of creating social panic. At that time, there were no reports of store stockouts or other indications of panic, suggesting that the social environment in the US was stable.

The pattern of increasing “first reports” from more countries—including Kuwait, Bahrain, Algeria, Brazil, Austria, Croatia and Switzerland—indicated that the virus was widely circulating across the globe. In light of the virus’s unusually long incubation period and sometimes mild symptoms (which make it difficult to identify all cases), the large number of confirmed cases indicated that sustained transmission was already occurring in multiple countries.

The significant growth in the number of confirmed cases in South Korea was further confirmation that rapid spread and sustained transmission were occurring outside of China. It also confirmed that there weren’t unique conditions—conditions that might not be present in a more developed country like South Korea—in China that materially exacerbated the spread of the virus (such as the unprecedented quarantine procedures).

About the SITREP Index

The Coronavirus SITREP Index isn’t intended to replace or modify any official government guidance or directives regarding the coronavirus. The index is intended to assist business leaders in planning and coordinating a gradient of business-contingency policies in response to a rapidly evolving situation.

Our SITREP Index, which ranges from 0 to 10, is a composite assessment based on quantitative and qualitative information across three classes of data.

  • Scientific/epidemiological: information about the virulence and transmissivity characteristics of the COVID-19 “coronavirus” that provides objective data about how the virus may spread
  • Economic: information about the direct and indirect effects of the epidemic on consumer and business behavior, including the potential for supply chain disruptions
  • Social: information about government actions and public reactions, including social distancing and quarantines

We’re combining official data with our own modeling to generate a holistic appraisal. This modeling relies on our experience with data triangulation, which is especially relevant today in light of the diversity and irregularity of the data sources surrounding this rapidly changing situation.

When official data appears to require directional adjustments to account for inadequacies or limitations in data collection, we rely on triangulation across multiple data sources and modeling to generate an adjusted assessment.

To assess economic and social conditions, we’re relying on a combination of high-frequency anecdotal reports and more conventional macroeconomic data. We’re also monitoring social media and other unconventional data sources, discounting appropriately based on relative assessments of credibility and reliability.

Based on our real-time monitoring of the progression of the epidemic, the Coronavirus SITREP Index is adjusted to take into account a continuum of milestone events that reflect the increasing severity of the epidemic’s effects on the business operating environment.

For example, the extension of the Hubei/Wuhan-area quarantine past the Lunar New Year holiday week warranted raising the index due to the likelihood of supply chain disruptions not normally associated with the seasonal holiday.

Also, the sustained community transmission in multiple nations—including Italy, South Korea and Iran—warranted increasing the index because it demonstrated that containment efforts within China weren’t completely successful, raising the eventual likelihood of global-scale impact.

The index is scaled to facilitate the calibration of business-contingency policies along a stepped continuum—from normal operations (level 0) to severe global recession with global-scale operational disruptions (level 10).

Adjustments to the scale are based on current or imminent conditions. When appropriate, based on changes in factors like viral spread and economic activity, a projected trajectory of index increases is also added to support forward-looking preparations.

Related Insights


As the global pandemic deepens and the human cost of COVID-19 rises, the novel coronavirus outbreak is sending shocks through the world economy. But across industries, companies can take action now to protect their employees and customers and minimize the economic damage.

Karen Harris is managing director of Bain & Company's Macro Trends Group and is based in the firm's New York office. 


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