The COVID-19 pandemic poses unprecedented socioeconomic risks to the global economy, and the costs mandate an assessment of its impact on economic growth says Moody’s Analytics, a financial intelligence company, which operates independently of the Moody’s Investors Service credit rating agency.
An important step towards quantifying the impact is to identify the nature of this shock. The COVID-19 outbreak represents a sharp and synchronized global supply-shock that has simultaneously hit multiple economies, caused by the physical constraints to domestic production as a direct or indirect consequence of the outbreak.
“Our estimates indicate that highly integrated economies are expected to suffer the most significant setbacks. While the economies of Japan and South Korea can potentially contract by up to 8.6% in 2020, because of their higher sensitivity to overseas demand conditions, other economies such as Australia can experience output losses of up to 10.6% in 2020, because of reduced global demand for commodities such as coal and iron ore and a short-term slump in the demand for overseas education.”
Services-driven economies such as Singapore and Hong Kong can contract by up to 12.1% in 2020, as international travel restrictions weigh asymmetrically on these markets and erode their appeal as regional financial hubs. Services-driven economies such as Singapore and Hong Kong can contract by up to 12.1% in 2020, as international travel restrictions weigh asymmetrically on these markets and erode their appeal as regional financial hubs.
High-growth, developing economies such as China and India are likely to experience annual GDP losses in the range of 4.4% to 8.1% in 2020, led by significant declines in manufacturing output and retail trade. While an earlier resumption in economic activity prevents a protracted slowdown in China, India may experience a deeper contraction in the short term because of weakened internal forces in the event of an extended nationwide lockdown.
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