The Economic Impact of COVID-19 around the World: A Round-Up of the Most Recent Analysis

The International Monetary Fund estimates global growth to fall to -3 percent in 2020, a downgrade of 6.3 percentage points from estimates in January 2020. Global growth is projected to rebound to 5.8 percent in 2021, “assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective.” Over the next two years, cumulative output loss from the pandemic could reach 9 trillion dollars.

The International Labour Organization estimates that COVID-19 will wipe out “6.7 percent of working hours globally in the second quarter of 2020 – equivalent to 195 million full-time workers.” Regional estimates indicate that “large reductions are foreseen in the Arab States (8.1 per cent, equivalent to 5 million full-time workers), Europe (7.8 per cent, or 12 million full-time workers) and Asia and the Pacific (7.2 per cent, 125 million full-time workers).”

The World Bank estimates that sub-Saharan Africa’s economic growth will “decline from 2.4 percent in 2019 to -2.1 to -5.1 percent in 2020, the first recession in the region in 25 years.” The crisis will be particularly hard for Nigeria, South Africa, and Angola (the region’s largest economies), as well as other countries dependent on oil and mining exports. Their model predicts that “the COVID-19 crisis has the potential to create a severe food security crisis in Africa. Agricultural production is likely to contract between 2.6 percent in the optimistic scenario and 7 percent in the scenario with trade blockages. Food imports also decline substantially (from 13 to 25 percent) due to a combination of higher transaction costs and reduced domestic demand.”

The African Union estimates a loss of up to 20 million African jobs in both formal and informal sectors, and potential GDP loss of up to 4.5 percentage points due to disruptions from COVID-19.

Building on the World Bank growth estimates, Save the Children estimates that reductions in household consumption (7 percent to 10 percent because of the pandemic) will lead to an additional 40 to 59 million people living in extreme poverty in sub-Saharan Africa. “With more than half of all people in extreme poverty being children, those estimates suggest that between 22 and 33 million children will be pushed into poverty by the economic consequences of Covid-19.”

In a series of blog posts, Zollman et al. highlight the impact of coronavirus mitigation efforts on livelihoods of ordinary Kenyans. Their interviewees reported significant drops in household income, including those who are engaged in casual and agriculture livelihoods. Urban populations are being hit the hardest, “making some rural families worried… [that urban kin] may return to their rural homes empty-handed when remittances are needed most.” Self-employed individuals like small-market owners, tailors, and boda boda riders have seen drastic falls in customer demands.

Tamru, Hirvonen, and Minten report on the IFPRI blog that the pandemic has started to disrupt vegetable value chains in Ethiopia. Urban demand for fruits and vegetables has declined. Traders have stopped travelling to rural areas because of travel bans. Farmers face income loss because of falling prices for vegetables, shortages of (and rising prices for) farm inputs, and lockdown-induced labor scarcities.

Smart shares in a Twitter thread how the pandemic is forcing the Kenyan food chain through a “metamorphosis,” creating changes in consumer behavior that may last beyond the crisis. Kenyan consumers have started avoiding fish imported from China, preferring fish that are locally caught. Vegetable sellers also struggle with reduced operating hours because of curfews.

Similarly, Mutsaka reports how the virus is “choking off supply” of food in a predominantly food-insecure region. “Lockdowns in at least 33 of Africa's 54 countries have blocked farmers from getting food to markets and threatened deliveries of food assistance to rural populations. Many informal markets where millions buy their food are shut.”

Roth reports increased incidence of poaching rhinoceros for their horns because of reduced tourism to areas usually avoided by poachers. The pandemic’s impact on African tourism may also threaten funding to wildlife conservation efforts.

The IMF extends debt relief to 25 countries, 19 of which are in Africa. The IMF’s Catastrophe Containment and Relief Trust can “currently provide about US$500 million in grant-based debt service relief, including the recent US$185 million pledge by the U.K. and US$100 million provided by Japan as immediately available resources.”

Naido and Changole of Bloomberg summarize policy responses of African central banks. This includes interest rate cuts in Ghana and Kenya; reduced benchmark rates in Mauritius, Uganda and Namibia; and changes in liquidity requirements for commercial banks to encourage more lending.

Nigeria requests $6.9 billion from multilateral lenders to support the country’s response to the pandemic crisis. “Nigeria, whose revenues have tumbled with the fall in oil prices, has asked for $3.4bn from the International Monetary Fund, $2.5bn from the World Bank and $1bn from the African Development Bank.” Nigeria expects its 2020 budget will be cut by “$4.9bn due to low oil prices and the impact of the pandemic.”

Gustafsson, an economist at the University of Stellenbosch, analyzes the reaction of South Africa to the virus in comparison to more than 130 other countries: “If one examines each country’s most recent level of overall stringency, just 30 (of 139) countries had reached the maximum stringency level. One of these countries is South Africa… Restrictions with respect to accessing the workplace have been over twice as stringent as one might expect, at South Africa’s current point in the pandemic’s trajectory.”

Akwagyiram and Toyana write that lockdowns in Africa are saving lives, but are ruining livelihoods, especially in the informal sector “which accounts for more than 85% of employment across the continent.”

In the same spirit, Lashitew writes that unless an effective safety net for microentrepreneurs is in place, social distancing will not hold up.

Onyekwena and Ekeruche of Brookings lay out the impact of coronavirus on Nigeria’s economy, review current policy responses, and provide additional fiscal and monetary policy recommendations. “Given the size and scope of the economic impact of the pandemic, there is the need to implement other recovery strategies to stimulate demand.”

S&P Global Ratings estimates an additional $300 billion credit losses for Asia-Pacific banks.

Thailand’s bankers estimate an economic loss of over $40 billion for the country if the pandemic crisis goes beyond the second quarter, with most of the losses coming from the tourism sector. “The central bank has forecast the economy to contract 5.3% this year, which would be the weakest performance since 1998, when the Thailand was ravaged by the Asian financial crisis.”

The IMF estimates growth of emerging and developing economies in Asia to slow to 1 percent in 2020, a steep drop from 5.5 percent in 2019. Growth is expected to rebound to 8.5 percent in 2021 provided adequate measures are implemented and the pandemic is contained within the year.

The Philippines’ farm minister fears a sugar price spike due to the closure of sugar mills. “The shutdown of two of the Philippines’ major sugar mills due to coronavirus-containment measures could lead to a domestic shortage and trigger price spikes.”

Oi and Hoskins report the severe impact of coronavirus lockdown on clothing garment factory workers. “In normal times, [the interviewed garment factory in India] employ a total of 18,000 workers in three countries—Bangladesh, India and Jordan. But the outbreak has forced them to shut down the majority of the business.”

Pasricha reports that millions of farmers in India are unable to harvest and sell their crops because of “severe labor shortages, transport bottlenecks and plummeting demand due to a nationwide coronavirus lockdown.”

In Jakarta, Indonesia, coffin makers struggle to cope with demand as burials spike up by 40 percent compared to any other month in the past two years.

Tan reports that in Thailand, the price of rice has surged to a record seven-year high. “The rise in prices is due to expectations of higher demand for Thai rice after fellow top exporters India and Vietnam both face export disruptions of the strategic staple food due to the outbreak of the coronavirus disease.”

Thailand considers borrowing $30.6 billion from local and foreign lenders to finance the country’s economic stimulus program.

The Asian Development Bank will provide $2.2 billion assistance to India “to help alleviate the economic impact of the pandemic on the poor, informal workers, micro, small, and medium-sized enterprises and the financial sector.”

Hongkong announces a $17.7 billion package to “help businesses and people crippled by the coronavirus outbreak to stay afloat, as the city joins global efforts to cushion the impact of the pandemic.”

In the Federated States of Micronesia, “President David Panuelo has announced a $15m economic stimulus package, with a focus on wage subsidies.”

Samoa plans a $23.6 million package to deal with the impact of the pandemic, while 50 hotels have closed temporarily and over 500 workers have lost their jobs.

Economics Nobel Prize winners Sen and Banerjee, together with economist Rajan write that “We in India worry a lot about the possible mis-steps that can happen in the implementation of large-scale transfers; the money (or the food ) may end up in the wrong hands, some intermediary may get rich at the expense of the taxpayer… In times like these, amidst the pandemic and the global economic crisis, with the nation in lockdown and with lives and livelihoods at stake, it is the wrong set of concerns.” They go on to propose specific actions for the government to take.

Aiyar at the Centre for Policy Research proposes that the government of India should “universalise the public distribution system (PDS), expand cash transfers and remove all hurdles to accessing entitlements for the next three months.” She also cites a report that “by the third week of the lockdown, 50% of workers had less than one day’s worth of rations. More worrying, 96% had not received rations from the government while 70% had not received any cooked food.”

Islam and Divadkar write an op-ed providing recommendations for Bangladeshi leaders on responding to the economic fallout from the virus. Recommendations include “an unconditional cash transfer program for an initial period of three months at a rate of $95 per month, which corresponds to the minimum wage for the formal sector in Bangladesh.”

The World Bank estimates that real GDP growth for Latin America and the Caribbean (excluding Venezuela) will drop to -4.6 percent, from an already low -0.1 percent in 2019. In addition to adverse external shocks from other countries’ efforts to contain the pandemic, “commodity prices can also be expected to decline sharply, with deleterious consequences for a region whose exports depend heavily on natural resources.” The collapse of oil prices will negatively affect oil exporters but might be a welcome relief for importers. Tourism has fallen and will have an adverse impact particularly in countries in the Caribbean.

The Inter-American Development Bank estimates GDP growth reduction of between 1.8 percent and 5.5 percent for Latin America and the Caribbean due to the impact of the pandemic. “The economic damage will carry into 2021 and 2022 unless governments implement well-focused programs to offset the impacts…The report provides fiscal, monetary and financial policy recommendations for countries in the face of the region’s most severe economic challenge since the Great Depression.”

In Argentina, Oglietti and others report that “without intervention by the state, the grave world economic crisis caused by COVID-19, could cause a fall in the gross domestic product of Argentina of up to -5.6% in 2020 and a loss that could reach 558 thousand jobs. … It would take 7 quarters for the economy to recover the level of activity prior to the crisis.”

A Caribbean-specific report from the Inter-American Development Bank highlights particular challenges in that region: “Tourism accounts for … between 34 and 48 percent of total GDP in The Bahamas, Barbados, and Jamaica.” They put this shock into the context of previous crises: “We conclude that there is no precedent — at least in recent decades — for the current shock to tourism in the Caribbean region.”

González Prieto writes that “Argentina is the country that receives the most tourism in Latin America, with … more than seven million tourists per year. Today the activity is stopped.”

What about remittances? “Nicaragua is one of the Latin American countries whose economy depends largely on the money that Nicaraguans send from other countries, and although the government has not presented official figures, economists such as Luis Núñez warn of a drop in remittances of up to 25%.” (Ocaña)

Trejo reports that “although the decline in inventories in China caused an increase in the value of copper in the market, the measures taken by Chilean miners to continue copper operations during the COVID-19 pandemic project a decrease of 5.5% in the national production of the mineral this year.”

Violent crime is down, according to Semple and Ahmed: “In El Salvador, the number of murders plunged by nearly half between February and March. Neighboring Honduras has also seen a falloff in killings in recent weeks, as has Colombia and the most populous state in Mexico. As nations around the world contend with a growing number of fatalities caused by the coronavirus, some are simultaneously experiencing an unanticipated — and welcome — decline in a different form of death: murder.”

“15 million workers in Colombia will be affected by the current pandemic that has paralyzed the country and much of the world... Agriculture is the sector in which the coronavirus would cause the greatest impact. The … investigation warns that there may be 1.9 million jobs that can be 'infected'.” (Espejo)

Poor Colombians are falling through the cracks, according to Bocanegra: “The family is among many low-income Colombians who have yet to receive help from the government, despite promises no one would go hungry during the more than month-long lockdown and additional payments to those on welfare programs.”

In Peru, with 65 percent of workers in the informal sector, “the stimulus of 26 billion dollars, 12% of GDP, seeks to provide liquidity in the face of the health emergency and will translate into aid for the most vulnerable classes.” (Fowks)

“The Central Bank of Peru announced … that it reduced its benchmark interest rate to its lowest historical level of 0.25%, from 1.25%.” (Aquino)

Chile announced “a second economic package to face the coronavirus pandemic, with a fund of $2 billion for the poorest families and a line of credit for companies with a state guarantee of $24 billion.” (infobae)

In Brazil, digital savings accounts are being opened for more than 3 million people on the social welfare registry who don’t currently have savings accounts. (Vinhas)

In Ecuador, the president announced a plan to create a fund paid for by contributions from businesses and citizens “to ensure health care, food provision and job protection.” (Actualidad)

Nuguer and Powell of the Inter-American Development Bank highlight a range of activities that central banks in the region can take: “Lowering the policy interest rate may then still be a useful tool in countries where such actions may translate to a lower cost of financing for firms and lower loan repayments for households.”

The Strategic Center on Geopolitics in Latin America sponsors a petition: “We as the Latin American Strategic Center for Geopolitics (CELAG) call for the cancellation of the sovereign foreign debt by the IMF and other multilateral organizations (IDB, WB, CAF) and urge international private creditors to accept an immediate process of debt restructuring that contemplates an absolute default of two years without interest.”