ADB: COVID-19 to significantly shave off growth in most of Asia

MANILA, Philippines — The outbreak of coronavirus disease 2019 (COVID-19) could shave off between 0.2 to 0.5 percentage point of the economic output in developing Asia – excluding China – as the impact will be “significant” across numerous parts of the economy, according to a new analysis of the Asian Development Bank (ADB).

The report, titled “The Economic Impact of the COVID-19 Outbreak on Developing Asia,” provides an assessment on the estimated impact of the contagion on the global economy, China and developing Asia excluding China, under three scenarios.

This considers the sharp decline in domestic demand, reduction in tourism business travel, trade and production linkages, supply disruptions, and health effects.

“The COVID-19 outbreak will have a significant impact on developing Asian economies through numerous channels,” said the multilateral bank. “The magnitude of the economic losses will depend on how the outbreak evolves which remains highly uncertain.”

Under a best case scenario in which the outbreak in China is contained within two months from the start of the outbreak in January, will affect 0.2 percentage point of gross domestic product (GDP) in developing Asia equivalent to $16 billion in losses.

The world economy, meanwhile, stands to suffer losses of $77 billion under this scenario, equivalent to 0.1 percentage point of global GDP. China, the epicenter of the contagion, stands to suffer an impact on 0.3 percentage point of its GDP equivalent to $44 billion in losses.

In a moderate scenario where the outbreak is more widespread and lasts around three months, economic losses in developing Asia will remain at 0.2 percent age point of its GDP but will be larger in absolute value at $22 billion.

The impact on the world economy will be larger at 0.2 percent of the global economy valued at $156 billion while in China will suffer loses of $103 billion equivalent to 0.8 percent of its GDP.

In a scenario where the outbreak is protracted up to six months, 0.5 percent age point of developing Asia’s GDP equivalent to $42 billion will be affected. 

Losses to the world economy, meanwhile, is estimated at $347 billion equivalent to 0.4 percent age point of global GDP while China’s economic losses are expected to hit $237 billion, 1.7 percent age point of its GDP.

The last scenario assumes there is a large decline in both consumption and investment growth in China.

ADB identified the Philippines as among the developing member countries (DMC) that will be significantly affected by the contagion because of its strong trade and production linkages with China. The others are Singapore, Taiwan, Vietnam, Hong Kong and Mongolia.

The main channel through which many of ADB’s DMCs will be affected will still be tourism. The bank estimates that Philippine tourism stands to lose between $801.4 million to $2.25 billion across scenarios.

“There are many uncertainties about COVID-19 including its economic impact,” said ADB chief economist Yasuyuki Sawada. “This requires the use of multiple scenarios to provide a clearer picture of potential loses. We hope this analysis can support governments as they prepare clear and decisive responded to mitigate the human and economic impact of this outbreak.”

ADB has so far  responded to the contagion by mobilizing  a total of $4 million in financing to support country efforts to contain the spread of the disease. This includes the $2 million announced on Feb. 7 to enhance detection, prevention, and response in the PRC and the Greater Mekong Subregion; and another $2 million announced on Feb. 26 to support response in all its developing members;

It also extended an $18.6 million private sector loan on Feb. 25 to Wuhan-based pharmaceutical distributor Jointown Pharmaceutical Group Co. Ltd. to support the continued supply of essential medicines and personal protective equipment.

“ADB stands ready to provide further support to its developing members in their efforts to respond to the adverse impact of COVID-19. ADB will use appropriate means to address the identified needs including through existing and new financial assistance, emergency assistance lending, policy-based lending, private sector investment, and knowledge and technical assistance,” the bank said.