We are all getting ready for the second round of the fight between the virus and humanity. The first round was all about “flattening the curve,” meaning that we had to limit contagion through severe physical distancing measures, lockdowns and curfews. The virus has equalized all economies in this first stage, if I may say so. It didn’t matter how rich or poor your country was, your population was vulnerable just the same, and you had to shut down your economy just the same. As Jerome H. Powell, chair of the Federal Reserve, put it so elegantly, “It’s the virus, not the usual suspects” that led to the sudden stop in global economic activity.

The “usual suspects” are related to the strength of your macroeconomic fundamentals and competence of your policymakers or political business cycles. The structure of your economy, more or less, determined the depth of the contraction you suffered in the first phase. The higher the share of services, the deeper the contraction. Tourism revenues were especially important, and the more you were dependent on that particular cash stream, the deeper your problem. Transportation was also hit hard and made trade difficult. In a nutshell, the more open an economy was, the more problematic its situation would become.

Now we are getting into the second round, where we all are going to learn how to live with the virus, both in terms of physical distancing as well as economic activity. That’s what reopening is about. Reopening is ultimately a political decision. As the virus-related sudden economic stop started to bite the politicians, a discussion on reopening has started. It’s no longer just the virus that is hurting us, it’s the economy as well.

Note that in this second phase, it’s the usual suspects that are going to limit performance, not the virus directly. Macro fundamentals and economic policy capacity are becoming more important in determining the pace of recovery in this post-lockdown phase.

The newly published OECD Economic Outlook for June 2020 shows how emerging markets face bigger problems in this respect. Why? When it comes to highly indebted emerging market economies like Turkey, it’s about debt servicing capacity. In this second phase, resuming higher economic growth is essential to lowering the already high debt to GDP ratios. Yet emerging market economies with weaker macro fundamentals cannot provide adequate policy support, with negative implications for domestic demand and hence economic growth. “A further expansion of US dollar funding swap lines, potentially including more emerging-market economies may be of necessity” the OECD says, but even that may not be enough.

I think that the post-lockdown period is going to be a bumpy ride, where policy credibility is going to be of utmost importance. Policy credibility both for the consumers to get back to their pre-COVID-19 consumption baskets, and for international creditors to support the adjustment process.

In Turkey, we sometimes we get carried away and talk about the newly developing strategic opportunities related to the post virus environment. That is all fine, but they are skipping a vital step. We have to get out of the mess first.

This commentary was published in Hürriyet Daily News on 13.06.2020