Pandemic could cut off 9.7% of global GDP

MANILA, Philippines — The global economy could incur losses of as much as $8.8 trillion, equivalent to 9.7 percent of global gross domestic product (GDP) if it will take as long as six months to contain the spread of the coronavirus disease 2019, according to  the Asian Development Bank (ADB).

According to the report Updated Assessment of the Potential Impact of COVID-19, under a three-month containment scenario, losses to the global economy could be lesser at $5.8 trillion, equivalent to 6.4 percent of global GDP.

These updated assumptions are double the findings in the Asian Development Outlook 2020 published in April which estimated the cost of the pandemic to the global economy at a range of $2 trillion to $4.1 trillion.

Economic losses in Asia and the Pacific could range from $1.7 trillion (6.2 of regional GDP) under a three-month containment period to $2.5 trillion (9.3 percent of GDP) under a long containment scenario of six months.

The region is expected to account for about 30 percent of the overall decline in global output.  China, where the contagion started, could suffer losses of between $1.1 trillion and $1.6 trillion.

ADB noted that governments around the world have been quick in responding to the impacts of the pandemic, implementing measures such as fiscal and monetary easing, increased health spending, and direct support to cover losses in incomes and revenues.

Sustained efforts from governments focused on these measures could soften COVID?19’s economic impact by as much as 40 percent, according to the report. This could reduce global economic losses due to the pandemic to $4.1 trillion and $5.4 trillion.

The report covers 96 outbreak-affected economies with over four million COVID-19 cases.

“This new analysis presents a broad picture of the very significant potential economic impact of COVID-19,” said ADB chief economist Yasuyuki Sawada.

“It also highlights the important role policy interventions can play to help mitigate damage to economies. These findings can provide governments with a relevant policy guide as they develop and implement measures to contain and suppress the pandemic, and lessen its impacts on their economies and people.”

Under the short and long containment scenarios, around $1.7 trillion to $2.6 trillion will be cut off from global trade as border closures, travel restrictions, and lockdowns are implemented to arrest the spread of the virus.

As economies contract, some 158 million up to 242 million jobs will be lost, with Asia and the Pacific comprising 70 percent of total job losses. Incomes around the world, meanwhile, will decline by $1.2 trillion to $1.8 trillion.

Policymakers should work together to quickly control the pandemic because the longer the containment period, the more difficult and prolonged the recovery will be, the report said.

Strong income and employment protection are critical to support the most vulnerable and avoid long- term economic scarring.

Governments are also urged to manage supply chain disruptions as well as support and deepen e-commerce and logistics for the delivery of goods and services.