COVID-19’s Global Economic Impact Could Reach $8.8 trillion — ADB

Video | 15 May 2020

ADB's estimate is that the novel coronavirus disease (COVID-19) pandemic would result in global losses of $5.8 trillion to $8.8 trillion, or 6.4% to 9.7% of global gross domestic product (GDP), in the absence of any policy response, says ADB's Chief Economist Yasuyuki Sawada. This is more than double ADB's estimate in April 2020.

Economies with domestic outbreaks and strict lockdowns will be hardest hit as domestic demand weakens sharply. More open economies, and those that are tourism- or commodity-dependent, will also suffer from the collapse in global demand.

Containing the pandemic is key to reducing the economic cost. Sufficient testing, tracing, and isolation; effective social distancing; and securing protective and medical equipment are all essential elements. It is also important for the government to support struggling families and businesses to mitigate adverse impacts of the pandemic and to avoid long-term consequences for growth and development.

ADB's analysis finds that government policy responses will soften COVID-19’s global impact by 30% to 40%, reducing losses to $4.1 trillion to $5.4 trillion, or 4.5% to 5.9% of global GDP.

Rapid and effective containment will allow for a faster recovery. For this, adequate testing, tracing, and isolation are key. Then, it is critical to identify industries and occupations in terms of essentiality and economic importance, and their ability to operate safely with adequate social distancing.

Finally, governments should re-open the economy sequentially, balancing health risks and economic considerations, and being ready to tighten if outbreaks reoccur. For all of this, having adequate data and information is key.

Transcript

Question: What is the latest ADB estimate of the economic impact of the COVID-19 pandemic in Asia and the Pacific? 

Yasuyuki Sawada: This is our third assessment of COVID-19’s impact. Our latest estimate is that the COVID-19 pandemic would result in global losses of $5.8 trillion to $8.8 trillion, or 6.4% to 9.7% of global GDP, in the absence of any policy response. This is more than double our estimate from last month. Economies with domestic outbreaks and strict lockdowns will be hardest hit as domestic demand weakens sharply. More open economies, and those that are tourism- or commodity-dependent, will also suffer from the collapse in global demand.

Q: What timely policy interventions can help mitigate the economic impact of the COVID-19 pandemic?

YS: First, containing the pandemic is key to reducing the economic cost.  Sufficient testing, tracing, and isolation, effective social distancing, and securing protective and medical equipment are all essential elements.  Second, it is important for the government to support struggling families and businesses to mitigate adverse impacts of the pandemic and to avoid long-term consequences for growth and development. Our analysis finds that government policy responses will soften COVID-19’s global impact by 30% to 40%, reducing losses to $4.1 trillion to $5.4 trillion, or 4.5% to 5.9% of global GDP.

Q: What should policymakers do to contain the COVID-19 pandemic’s economic impact?

YS: Rapid and effective containment will allow for a faster recovery. So governments should focus first on containing the pandemic.  For this, adequate testing, tracing and isolation are key.  Second, it is critical to identify industries and occupations in terms of essentiality and economic importance, and their ability to operate safely with adequate social distancing. Third, governments should re-open the economy sequentially, balancing health risks and economic considerations, and being ready to tighten if outbreaks reoccur. For all of this, having adequate data and information is key.