Covid 19 Likely to Reduce Global GDP by 0.1-0.4%

1:12:38 PM | 20/3/2020

According to the Asian Development Bank (ADB), the magnitude of the economic losses will depend on how the outbreak evolves, which remains highly uncertain. The range of scenarios explored in the analysis suggests a global impact in the range of US$77 billion to US$347 billion, or 0.1% to 0.4% of global gross domestic product (GDP).

Loss in all channels

The ongoing Covid-19 outbreak will have a significant impact on developing Asian economies through numerous channels, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions, and health effects.

The magnitude of the economic losses will depend on how the outbreak evolves, which remains highly uncertain. In a moderate scenario, where precautionary behaviors and restrictions such as travel bans start easing three months after the outbreak intensified and restrictions were imposed in late January, global losses could reach US$156 billion, or 0.2% of global GDP. China would account for US$103 billion of those losses - or 0.8% of its GDP. The rest of developing Asia would lose US$22 billion, or 0.2% of its GDP.

ADB Chief Economist Yasuyuki Sawada said, “There are many uncertainties about Covid-19, including its economic impact. This requires the use of multiple scenarios to provide a clearer picture of potential losses.”

The ADB analysis report presents full details on the scenarios considered. It also presents estimated impacts on individual developing Asian economies - and on sectors within these economies - including under a hypothetical “worst case” scenario for a given economy in the event of a significant outbreak. These should not be interpreted as predictions that an outbreak will occur but are meant to provide guidance for governments as they consider appropriate responses.

ADB’s response to Covid-19 to date includes US$2 million announced on February 7 to enhance detection, prevention, and response in China and the Greater Mekong Subregion. Another US$2 million announced on February 26 to support response in all its developing members. A CNY130 million (US$18.6 million) private sector loan, signed on February 25, to Wuhan, China-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.

Serious impact on Vietnam's economy

According to economists, the Covid-19 epidemic has a very serious impact on the Vietnamese economy. The epidemic has had a multidimensional impact on all sectors of the economy, with three main effects on growth, investment and trade; important value chain disruptions; and a decline in consumption that causes an enormous impact on services and tourism.

A report by the General Statistics Office (GSO) on socioeconomic performance in February and the first two months of 2020 showed many signs of negative effects on economic growth, macroeconomic stability. Many indexes decreased from a year-ago period.

In particular, disbursed foreign direct investment (FDI) decreased by 5%; fresh and additional FDI fund and foreign share-purchase fund sank by 23.6% from the same period in 2019. Total retail sales of consumer goods and services grew by 8.3 % (compared with a 9.3% growth a year ago). Passenger carriage expanded by 3.8% (versus 10.2% in the same period of 2029). International visitor arrivals climbed 4.8%, the lowest growth in the January-February period in 2016-2020. The consumer price index (CPI) in February and in the January-February period jumped 5.4% and 5.91%, respectively, the highest in seven years.

Some agricultural sectors faced many difficulties due to price changes and weather. The service sector is the worst affected by the Covid-19 epidemic, especially tourism, transportation, accommodation and restaurant.

The Covid-19 epidemic has exerted a pretty negative impact on industrial production. The index of industrial production went up 6.2% year on year in the first two months of 2020, much lower than the growth of 13.7% and 9.2% in the same period in 2018 and 2019, respectively.

In addition, February had a weeklong Lunar New Year and was affected by the Covid-19 epidemic. Some contractors were slow to deploy construction. And, like previous years, they mainly continued to carry out projects launched in previous years rather than kick off new ones. Hence, the State budget investment expenditure was as low as 8.3% in the first two months. Besides, realized FDI value was estimated at US$2.5 billion from January to February, down 5% year on year, the first decline in 2016-2020.

According to many experts, Vietnam's economic growth in the coming time depends heavily on how the Covid-19 epidemic evolves and how Vietnam copes with the disease.

By Anh Mai, Vietnam Business Forum