Nationwide Lockdown, Population Density, and Financial Distress Brings Inadequacy to Manage COVID-19: Leading the Services Sector into the Trajectory of Global Depression

The service industry provides distributive services, producer services, personal services, and social services. These services largely breakdowns due to restrictions on border movements, confined travel and transportation services, a decline in international tourists’ visitation, nationwide lockdowns, and maintaining social distancing in the population. Although these measures are highly needed to contain coronavirus, it decreases economic and financial activities in a country, which requires smart solutions to globally subsidize the services sector. The study used different COVID-19 measures, and its resulting impact on the services industry by using world aggregated data from 1975 through 2020. The study benefited from the Keynesian theory of aggregate demand that remains provided a solution to minimize economic shocks through stringent or liberalizing economic policies. The COVID-19 pandemic is more severe than the financial shocks of 2018 that affected almost all sectors of the globalized world, particularly the services sector, which has been severally affected by COVID-19; it is a high time to revisit economic policies to control pandemic recession. The study used quantiles regression and innovation accounting matrix to obtain ex-ante and ex-post analysis. The quantile regression estimates show that causes of death by communicable diseases, including COVID-19, mainly decline the share of services value added to the global GDP at different quantiles distribution. In contrast, word-of-mouth helps to prevent it from the transmission channel of coronavirus plague through information sharing among the general masses. The control of food prices and managing physical distancing reduces suspected coronavirus cases; however, it negatively affects the services sector’s value share. The smart lockdown and sound economic activities do not decrease coronavirus cases, while they support increasing the percentage of the services sector to the global GDP. The innovation accounting matrix suggested that smart lockdown, managing physical distancing, effective price control, and sound financial activities will help to reduce coronavirus cases that will further translate into increased services value-added for the next ten years. The social distancing will exert a more considerable variance error shock to the services industry, which indicates the viability of these measures to contained novel coronavirus over a time horizon. The study used the number of proxies to the COVID-19 measures on the service sector that can be continued with real-time variables to obtain more inferences.