The Economic Impact of COVID-19 around the World: Remittances, Updated Growth and Poverty Projections, and the Reintroduction of Barter in Fiji

The Asian Development Bank (ADB) “estimates that the global economic impact of COVID-19 could reach $5.8 trillion (6.4% of global GDP) under a 3-month containment scenario, and $8.8 trillion (9.7% of global GDP) under a 6-month containment scenario” in an updated report. “ADB’s new estimate is more than double the World Bank’s 16 April 2020 estimate of a 2%–4% decline in global GDP, and higher than the IMF’s April 2020 World Economic Outlook estimate of 6.3% decline in global GDP.” (ADB)

Mercy Corps reports on economic and food security impacts of the pandemic including rising prices of food staples, reduced purchasing power, unequal impact on businesses “with larger, more formal and better networked firms faring better than their informal counterparts,” liquidity challenges for financial service providers, and an expected drop in remittances. The data come from Mercy Corps’ 22 country offices. (Mercy Corps)

The World Food Programme reports on the economic and health impacts the pandemic may have on food and nutrition security: “Increased reprioritisation of national expenditure towards control of COVID19 will affect allocations to other sectors such as agriculture which would have long-term effects on food production and supply.” The decline in tourism, potential drop in remittances, and high dependence on commodity exports leave some countries particularly vulnerable. (WFP)

Sulser and Dunston model the potential effects export constraints have on prices of rice and wheat. “Some governments have responded to alarms about possible COVID-19-related food shortages much as consumers would: By trying to hoard food… [Sulser and Dunston] conclude that international rice markets are particularly sensitive to such restrictions by large exporters—modeling shows they could significantly boost global prices and push millions of poor rice consumers into hunger.” (IFPRI)

Pate and Van Nieuwkoop warn that “unhealthy diets are contributing to pre-existing conditions” that put people at risk. They provide three policy recommendations on “how nutrition can protect people’s health during COVID-19”: securing food at affordable prices, ensuring better nutrition through bio-fortified crops and improving supply chains, and realigning public spending to health and nutrition goals. (World Bank)

The United Nations Food and Agriculture Organization reports that “world food prices fell for a third consecutive month in April, hit by the economic and logistical impact of the coronavirus pandemic… Sugar price index fell to a 13-year low… The vegetable oil price index fell 5.2%... [and] the meat index shed 2.7%.” (Reuters)

Pangestu provides three policy priorities in reducing the impact of the pandemic on the most vulnerable and most insecure: ensuring access and financing for farm inputs, prioritizing transportation of food to ensure produce reach markets, and ensuring social safety nets are in place so people have the money to purchase food items. (World Bank)

Perakis, Khosla, and Bari document how education organizations are providing relief packages (Luminos in Liberia) and cash transfers (The Citizens Foundation in Pakistan) to poor communities. (CGD)

Clemens discusses the World Bank’s estimates that remittances will fall by nearly a quarter this year and what that means for global development: Big impacts on poverty, limited impacts on growth. He proposes three policy actions to mitigate the impacts. “This global lifeline for poor families will remain. But it will be more vulnerable now than ever in our lifetimes.” (CGD)

The World Food Programme warns that over 40 million people in West Africa will face “desperate food shortages” in the coming months, especially in the lean season in June and August. (UN News)

Thurlow reports findings from country studies showing that “the current crisis is leading to much larger and more rapid contractions of economic activity than seen in previous crises, including the global food crisis of 2007-2008 and the 2009 recession. In addition, unlike in previous crises, it is domestic policies, rather than global shocks, such as trade disruptions and reduced remittances, that are imposing most of the economic costs, at least for now.” (IFPRI)

Cocoa planters in Côte d'Ivoire fear a drop in income due to restrictions imposed by mitigation efforts against the pandemic. Border closures and traffic disruptions could “reduce the workforce available at the start of the mid-crop harvest of cocoa beans… [introduce] delays or a slowdown in bean purchases…[and] affect the delivery of beans to the country's ports.” (Market Screener)

The Tanzanian government warns that tourism revenue will shrink by 77 percent, with 477,000 jobs at stake. “The Natural Resources and Tourism minister…said the number of people who will lose jobs accounts for 76 percent of the total direct employment in the sub-sector…The number of tourists anticipated visiting Tanzania during that period will decline from 1.9 million to 437,000.” (Ventures Africa)

Madagascar lost “half a billion dollars in much-needed tourism revenue since the start of 2020 because of the COVID-19 crisis...There is uncertainty around future funding for conservation in Madagascar, which leans heavily on foreign financing. At the same time protecting natural resources will become more challenging if economic hardship intensifies in one of the poorest countries in the world.” (Mongabay)

The “South African gambling industry sees major impact due to Covid-19 outbreak and restrictions…. Horse racing and sports events have been cancelled or postponed indefinitely since the coronavirus outbreak, and … casinos, bingo halls and other gambling establishments have been closed until further notice.” (Intrado)

Kenya, the world’s second largest tea exporter after China, sees no disruption to its tea export so far. “Due to its designation as an essential service, the tea industry is excluded from the nationwide dawn-to-dusk curfew and the ban on all movement into the four areas worst hit by coronavirus.” (African Business)

Malawi’s National Planning Commission released a rapid cost-benefit analysis enumerating the costs of a moderate lockdown strategy such as “less health outreach and more malnutrition, causing more deaths from malaria, from TB and from child mortality along with… extra maternal deaths” against reduced Covid-19 death toll, and ”the social cost of closing schools for Malawi will be around $5.2 billion – the present value of income loss for 6 million children over the next 50 years.” The report concludes that “the costs vastly outweigh the benefits from moderate lockdown that promotes social restrictions.” (NPC)

The IMF approves $411 million in emergency assistance for Ethiopia. “It also approved Ethiopia’s request for a suspension of debt service payments of about $12 million to the IMF under the IMF's Catastrophe Containment and Relief Trust for poor countries.” (IMF News)

Zimbabwe and Uganda call on international creditors for debt relief “to ease the economic distress caused by the outbreak of the novel coronavirus.” (VOA, Reuters)

South Africa seeks $5 billion in financing from multilateral banks to support the country’s $26 billion stimulus package. (Moguldom Nation)

Zambia also seeks additional funding from the IMF, as it struggles “with a growing public debt even before the new coronavirus outbreak forced lockdowns across the globe, delivering a big blow to demand for raw materials. Zambia is Africa's second biggest copper producer.” (Nasdaq)

Bouët and Laborde echo a previous warning that “border policies create problems for African trade and economic pain for communities…Stricter sanitary border controls on the transport of products should slow down intra-African trade. In addition, prohibiting people from crossing the border stops one means of informal trade, widely practiced in Africa and often the main source of income for a family.” (IFPRI)

The United Nations Economic Commission for Africa released lockdown exit strategies for Africa. The report highlights “excruciating trade-offs”—“lockdowns impose extremely high costs on business and people…[but] lockdowns forestall severe vulnerabilities” in healthcare—and provides four strategies in reopening economies. (UNECA)

Copley, Decker, and Delavelle encourage support for African women considering the gendered consequences of the pandemic. They suggest research-based policy options “to build women’s economic resilience” such as cash transfers targeted to women and providing competition and business skills training to the self-employed. (World Bank)

The Asian Development Bank’s new report projects an estimated 4.6 to 7.2 percent GDP decline in the region from a non-COVID-19 baseline. (ADB)

The Japan Center for Economic Research reports that Japan’s inflation-adjusted GDP contracted 3.5 percent in March compared to the previous month. (Nikkei Asian Review)

India’s Chief Economic Adviser estimates the country’s GDP growth in April-June this year to be between 1 and 2 percent. He says, “the economy could pick up [in the next quarter] as industries restart their operations with the streamlining of supply chains and migrant workers getting back to their jobs.” (livemint)

CARE and UN Women released an analysis of the impact of the pandemic on women in Asia Pacific, including the challenges of “exacerbated burdens of unpaid care work on women and girls,” unmet needs of healthcare workers who are overwhelmingly women, and “increased risks of gender-based violence,” among other issues (CARE, UN Women)

Thailand reports suicides due to pandemic-related economic hardships. “Thailand is well known for having one of the highest wealth inequalities in the world and one of the highest suicide rates in Southeast Asia.” (The Diplomat)

Indonesia’s small seaweeds processors are hit by the crisis: “demand for raw materials has decreased and prices have fallen… by almost 50% since trade with China, the biggest export market, has been disrupted since February.” (Modern Diplomacy)

In India, “the country has entered into the third and a more relaxed phase of lockdown” but only 3,500 auto dealers, 20 percent of the country’s car shops, have opened up. (Times of India)

Shell Petroleum Corp will shut down one of the Philippines’ two oil refineries “in response to the drastic decline in local product demand and the significant deterioration of regional refining margins brought about the COVID-19 pandemic.” (Reuters)

Some Fiji residents return to a barter system through a Facebook group “in response to sharp falls in employment due to coronavirus” and the accompanying scarcity of cash. Some residents of Tonga, Samoa, and Vanuatu have started to do the same, mostly trading for groceries and food items. (The Guardian)

The Asian Development Bank has approved a $300 million loan for Pakistan and allocated a $1.36 million grant for Uzbekistan to support pubic health care capacity and help meet the needs of the poor segments of the population.

The ADB approved a $500 million loan to Bangladesh to support efforts to manage the pandemic’s impact. “The loan is expected to benefit over 15 million poor and vulnerable people in Bangladesh.” (Big News Network)

Myanmar will receive around $2 billion from international development organizations to assist in the country’s relief plan. (The Irrawaddy)

Bangladesh reopens an estimated 1,000 garment factories. “More than four million people, many of them women, work in the $34 billion apparel export sector in Bangladesh — the second-largest garment exporter in the world after China.” (WWD)

Bangladesh exempts personal protective equipment and surgical masks from value-added tax. (Prothomalo)

Malaysia’s central bank cuts key interest rate to 2 percent, lowest since 2009. (Reuters)

Indonesia prepares “exit strategies to reopen parts of the economy…from as early as June 1… There is mounting concern about the deepening economic impact of restrictions with at least 2 million people losing their jobs in the past six weeks and poverty increasing.” (Reuters)

Kuriakose identify policy priorities as Malaysia reopens businesses to a “new normal.” (World Bank)

Fruman and Zhang identify seven research studies in South Asia aimed at ensuring food security in the midst of the pandemic, including research identifying drivers of malnutrition (such as gender) in the region, and impacts of a conditional cash transfer in Bangladesh, a dairy program in India, and a national nutrition assessment in Bhutan. (World Bank)

Indonesia might be facing a looming food crisis: “Indonesia’s food security has long been a source of concern due to the country’s reliance on staple food imports to meet domestic demand for commodities such as sugar, rice, corn, and beef.” (The Diplomat)

The European Bank for Reconstruction and Development forecasts negative growth in Jordan, Lebanon, Morocco, and Tunisia, with Lebanon the hardest hit: an economic contraction of 11 percent in that country. Only Egypt retains slight positive growth of 0.5 percent for 2020. (EBRD)

This is older, but since we haven’t included the Middle East and North Africa before, the World Bank’s April report on the region suggested a reduction in economic output for 2020, in contrast to the 2.6 percent growth forecast from late last year. (World Bank)

Likewise, the IMF provides an overview of the dual shock hitting the region—COVID-19 and falling oil prices, along with country responses: “The pandemic crisis has manifested itself in severe trade disruption and losses, hurting job-rich sectors and business confidence.” (IMF)

Morocco’s flag carrier airline, Royal Air Maroc, is losing $5 million per day. “The COVID-19 crisis will see airline passenger revenues drop by $314 billion in 2020, a 55% decline compared to 2019.” (Morocco World News)

The United Arab Emirates announced a “four month ban on exports of ferrous scrap and recovered paper” to support demand for “supplies of raw materials which are required by the economic operators for their manufacturing activities due to the coronavirus outbreak.” “The impact will be felt in India, which relies on the UAE for about one-fifth of ferrous scrap imports.” (Recycling International)

Survey shows “Egypt’s non-oil private sector activity collapsed in April, hit by a shutdown in the tourism industry, weakening demand and the imposition of a curfew as the government battled the coronavirus pandemic.” (Middle East Eye)

Morocco will distribute $440 million to about 4.3 million households “to help them cope with the social and economic impacts of the COVID-19 outbreak.” “The 2.3 million households registered in the Moroccan Medical Assistance Regime and 2 million families working in the informal sector and not enrolled in RAMED [the Moroccan Medical Assistance Regime] will benefit.” (Xinhua Net)

Morocco’s net international reserves up almost 20 percent despite COVID-19 shocks. “Morocco’s central bank, Bank Al-Maghrib, announced it injected MAD 91 billion ($9.25 billion) from May 7 to 13. During the same period, the Dirham appreciated by 0.23% against the Euro and by 0.89% against the Dollar.” (Morocco World News)

“The International Monetary Fund approved a $2.77 billion loan to Egypt in an attempt to prevent economic collapse in the Middle East’s most populous nation amid the coronavirus pandemic.” (Wall Street Journal)

Algeria cuts down the 2020 state budget by 50 percent. “The country is facing a combined shock from halving oil prices, a public health crisis and the consequences of global economic disruptions following the covid-19 outbreak.” (North Africa Post)

Dridi writes that “Tunisia’s economic fallout from a coronavirus outbreak and the rise of unemployment claims will further compound social and regional inequalities across the country.” The lockdown hits the informal, tourism, and industrial sectors, “worsening the economic woes Tunisia has faced since the Arab Spring.” (Carnegie Endowment for International Peace)

Estimates for Latin America and the Caribbean project poverty rising from 30.3 percent in 2019 to between 33.7 and 35.8 percent in 2020, depending on the scenario. For extreme poverty, the numbers go from 11.0 percent in 2019 to between 13.0 and 14.2 percent in 2020. CEPAL provides country-specific estimates and a roundup of policy responses. (CEPAL)

Estimates for Mexico specifically put between 6.1 and 10.7 million additional people in poverty. (Coneval)

“New York rating agency Standard and Poor’s estimated that Mexico will be the Latin American country with the weakest economic recovery after the coronavirus health crisis passes.” (infobae)

Díaz Cassou and others put out detailed economic impact analysis—including measures countries are taking to mitigate those impacts—for the Andean countries: Bolivia, Colombia, Ecuador, Peru, and Venezuela. (IDB)

In Chile, residents of a poor neighborhood rioted: “This isn’t against the quarantine. It’s against hunger,” said one protestor. (BBC)

Growth projections for Chile were reduced to -3.9 percent by the agency Fitch, currently lower than the projection of -2 percent from the Central Bank of Chile. (La Tercera)

Debt from Chilean businesses rose to 131 percent of gross national product at the close of the first trimester of the year, largely due to the depreciation of the peso relative to the dollar, according to the Central Bank of Chile. (notimérica)

International ratings agencies are wary of the rise in public debt in Brazil when gauging the future of the country’s economy. (Quintino)

The Central Bank of Honduras has predicted that gross national product will fall between 2.9 and 3.9 percent this year. (el diario)

The President of Peru announced that the economic impact of the virus may be comparable to the economic impact of Peru’s war with Chile in the 1880s. (El Comercio)

The economic impact on electricity distributors in Brazil rose to 5,411 billion reais ($950 million) between mid-March and last week, most of it due to delinquency in payments by users, according to a bulletin from the Ministry of Mines and Energy. (O Liberal)

Crude steel production fell 8 percent in the region in the first trimester. Refined steel fell 3 percent. Consumption in the region and the world are down. (Milenio)

The Colombian airline Avianca declared bankruptcy due to COVID-19. (El País)

Latin America’s coffee industry has been suffering from labor shortages during the harvest, but prices have also risen because of increased coffee consumption in homes. The president of the Council of Coffee Exporters of Brazil, Nelson Carvarlhaes, says that “Coffee has always been a great companion in times of crisis.” (El Economista)

The nongovernment organization Action Against Hunger “has drawn attention to the situation of the 900,000 Venezuelan migrants in Peru, since ‘one in three has been left unemployed during the quarantine.’” (notimérica)

Remittances to Venezuela have seen a large downturn as Venezuelan migrants have lost work and many have returned home. “Some 20,000 Venezuelans have returned home since early March, according to the Colombian government, which has paid about 396 bus tickets to take them to the Venezuelan border.” (Telemundo51)

The telecom sector in Latin America could see a loss of $4.3 billion in 2020 due to COVID-19, largely due to business closures. (Convergência Digital)

Peru is allowing participants in the private pension system to withdraw up to 25 percent of their accumulated funds. (El Universo)

A new bulletin proposes four phases of response to the livelihood and food security impacts of COVID-19, with best practice examples from Latin America and the Caribbean for each. (FAO and CEPAL)

The President of Mexico proposed a plan last week to transition to a “new normal,” with phased re-opening of the economy, starting with the 269 municipalities least affected by the virus. (DW)

An editorial in the Financial Times is broadly critical of Latin America’s COVID-19 response, with positive exceptions for Colombia, Costa Rica, and Uruguay. Still, “what no country in the region will escape is the devastating economic impact. Latin America was the world’s slowest growing region even before the coronavirus crisis. Now, Covid-19’s impact on commodity prices, tourism and remittances is hurting the region particularly hard. Fragile public finances and massive capital flight limit governments’ room for fiscal responses.” (Financial Times)

Cordero raises the concern of large internal displacement of informal workers in Peru in the context of the crisis and calls for action. (nodal)

Fiorito sums up the biggest economic risks and challenges for Latin America, three policy actions that countries can take, and the role of credit agencies and the IMF. (CGD)