MANILA, PHILIPPINES, 15 May 2020 – The global economy could suffer between US$5.8 trillion and US$8.8 trillion in losses, equivalent to 6.4 percent to 9.7 percent of global Gross Domestic Product as a result of COVID-19, according to a new report released by the Asian Development Bank (ADB).
The Updated Assessment of the Potential Economic Impact of COVID-19 report by ADB discovered that economic losses in Asia and the Pacific could range from US$1.7 trillion under a short containment scenario of three months to US$2.5 trillion under a long containment scenario of six months, with the region accounting for about 30 percent of the overall decline in global output.
It 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 30 percent to 40 percent. This could reduce global economic losses due to the pandemic to between US$4.1 trillion and US$5.4 trillion,” ADB chief economist Yasuyuki Sawada said in a statement today.
The analysis, which uses a Global Trade Analysis Project-computable general equilibrium model, covers 96 outbreak-affected economies with over four million COVID-19 cases.
In addition to shocks to tourism, consumption, investment, and trade and production linkages covered in the Asian Development Outlook 2020 estimates, the new report includes transmission channels such as the increase in trade costs affecting mobility, tourism, and other industries; supply-side disruptions that adversely affected output and investment; and government policy responses that mitigated the effects of COVID-19’s global economic impact.
Under the short and long containment scenarios, the report notes that border closures, travel restrictions, and lockdowns that outbreak-affected economies implemented to arrest the spread of COVID-19 will likely cut global trade by US$1.7 trillion to US$2.6 trillion.
“Governments should manage supply chain disruptions; support and deepen e-commerce and logistics for the delivery of goods and services; and fund temporary social protection measures, unemployment subsidies, and the distribution of essential commodities – particularly food – to prevent sharper falls in consumption,” Yasuyuki added.
On global employment, he said it would decline to between 158 million and 242 million jobs, with Asia and the Pacific comprising 70 percent of total employment losses.
Labour income around the world will decline by US$1.2 trillion to US$1.8 trillion, 30 percent of which will be felt by economies in the region, or between US$359 billion and US$550 billion.
Besides increasing health spending and strengthening health systems, strong income and employment protection are essential to avoid a more difficult and prolonged economic recovery.