ADB estimates damage to global economy from COVID-19 virus in 8.8 trillion USD
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- Category: Digest
Equivalent to 6.4-9.7 of global gross domestic product (GDP) as a result of the pandemic of the new coronavirus disease COVID-19. This is stated in a new report by the Asian Development Bank.
The updated COVID-19 Potential Economic Impact Assessment report indicated that economic losses in the Asia-Pacific region can range from 1.7 trillion USD for a scenario with a short holding period of three months to 2.5 trillion USD for a scenario with a long containment of 6 months. At the same time, the region accounts for about 30% of the total reduction in world production. The People’s Republic of China may suffer losses ranging from 1.1 to 1.6 trillion USD. The new analysis updates the findings presented in the Asian Development Outlook (ADO 2020), which predicted that global losses from COVID-19 will range from 2 to 4.1 trillion USD.
Countries around the world are quickly responding to the effects of the pandemic by introducing measures such as easing fiscal and monetary policies, increasing health spending and direct support to cover income losses. According to the report, government efforts can mitigate the economic impact of COVID-19 by 30-40%. This could reduce global economic losses due to the pandemic to levels ranging from 4.1 trillion to 5.4 trillion USD.
The analysis, which uses the estimated global equilibrium model as part of the global trade analysis project, covers 96 countries affected by the outbreak, with more than 4 million cases of COVID-19. In addition to the shocks associated with tourism, consumption, investment, trade and manufacturing, which are covered by the ADO 2020 estimates, the new report includes transmission channels such as increased trade costs affecting mobility, tourism and other industries; supply disruptions that negatively affect production and investment; and government policies that mitigate the global economic impact of COVID-19.
“This new analysis provides an overview of the very significant potential economic impact of COVID-19. It also emphasizes the important role of policy measures that can help mitigate economic damage. These conclusions can provide governments with appropriate guidance in developing and implementing measures to contain and suppress a pandemic and reduce its impact on the economy and population”, said ADB chief economist Yasuyuki Sawada.
The ADB Policy Action Database COVID-19 contains detailed information on key economic measures that ADB member countries are taking to combat the pandemic.
Under short and long containment scenarios, the report notes that border closures, travel restrictions and quarantines that were applied in countries affected by outbreaks to stop the spread of COVID-19 are likely to cut world trade by 1.72.6 trillion USD. Global job cuts will range from 158 to 242 million jobs, with the Asia-Pacific region accounting for 70% of total job losses. Labor income worldwide will be reduced by 1.2-1.8 trillion USD, 30% of which will be felt by the countries of the region, or from 359 billion USD to 550 billion USD.
In addition to increasing health spending and strengthening health systems, income and employment protection is needed to avoid a more complex and lengthy economic recovery. Countries should address supply chain disruptions; support and deepen electronic commerce and logistics for the delivery of goods and services; and to fund temporary social protection measures, unemployment subsidies, and the distribution of basic goods, especially food, to prevent a sharp drop in consumption, the report said.