MANILA, May 15, 2020, Xinhua. The global economy could suffer between 5.8 trillion U.S. dollars and 8.8 trillion U.S. dollars in losses — equivalent to 6.4 percent to 9.7 percent of global gross domestic product (GDP) — as a result of COVID-19 pandemic, said a new report released by the Asian Development Bank (ADB) on Friday (May 15), Xinhua reported.
The report, Updated Assessment of the Potential Economic Impact of COVID-19, found that economic losses in Asia and the Pacific could range from 1.7 trillion U.S. dollars under a short containment scenario of 3 months to 2.5 trillion U.S. dollars under a long containment scenario of 6 months, with the region accounting for about 30 percent of the overall decline in global output.
The new analysis updates findings presented in the Asian Development Outlook (ADO) 2020 published in April, which estimated COVID-19’s global cost to range from 2.0 trillion U.S. dollars to 4.1 trillion U.S. dollars.
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, the report said, adding this could reduce global economic losses due to the pandemic to between 4.1 trillion U.S. dollars and 5.4 trillion U.S. dollars.
The analysis, which uses a Global Trade Analysis Project-computable general equilibrium model, covers 96 outbreak-affected economies with over 4 million COVID-19 cases.
In addition to shocks to tourism, consumption, investment, and trade and production linkages covered in the ADO 2020 estimates, the new report included transmission channels such as the increase in trade costs affecting mobility, tourism, and other industries; supply-side disruptions that adversely affect output and investment; and government policy responses that mitigate the effects of COVID-19’s global economic impact.
“This new analysis presents a broad picture of the very significant potential economic impact of COVID-19,” ADB Chief Economist Yasuyuki Sawada said in a statement.
“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,” he added.
ADB’s COVID-19 Policy Database provides detailed information on the key economic measures that ADB members are taking to combat the pandemic.
Under the short and long containment scenarios, the report noted 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 1.7 trillion U.S. dollars to 2.6 trillion U.S. dollars.
The report projected global employment to decline between 158 million and 242 million jobs, with Asia and the Pacific comprising 70 percent of total employment losses.
Labor income around the world will decline by 1.2 trillion U.S. dollars to 1.8 trillion U.S. dollars — 30 percent of which will be felt by economies in the region, or between 359 billion U.S. dollars and 550 billion U.S. dollars, said the report.
Apart from increasing health spending and strengthening health systems, the report said strong income and employment protection are essential to avoid a more difficult and prolonged economic recovery.
The report said 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.
Since the situation is rapidly evolving, ADB said it will update its impact assessment considering additional spillover channels as needed.