MANILA: The coronavirus pandemic could cost the global economy $4.1 trillion as it ravages United States, Europe and other major economies, the Asian Development Bank warned on Friday.
The estimated impact is equivalent to nearly five percent of worldwide output based on a range of scenarios, but the lender said losses from “the worst pandemic in a century” could be higher. “The estimated impact could be an underestimate, as additional channels such as…possible social and financial crises, and long-term effects on health care and education are excluded from the analysis,” the ADB said. The Manila-based bank said a shorter containment period could pare the losses to $2 trillion. The crisis has sent equity markets spinning as traders fret over the long-term impact on the world economy, though governments and central banks have stepped in to ease the pain, pledging more than $5 trillion in stimulus and easing monetary policy.
Officially reported COVID-19 cases worldwide topped the one million mark on Thursday, with tens of thousands dead, while there are warnings the numbers will continue to balloon as the disease rapidly spreads. With billions of people in lockdown and economies at a standstill, the ADB said Asia is forecast to grow 2.2 percent this year, its slowest pace since a 1.7 percent expansion during the Asian financial crisis in 1998. “No one can say how widely the COVID-19 pandemic may spread, and containment may take longer than currently projected,” ADB chief economist Yasuyuki Sawada said.
“The possibility of severe financial turmoil and financial crises cannot be discounted,” he added. The forecasts assume the coronavirus outbreak will be contained this year and a return to normality in 2021.
However, there is still the potential for additional outbreaks and the severity of the pandemic remains uncertain. “Outcomes can be worse than forecast and growth may not recover as quickly,” the bank said. Growth in China, the region’s largest economy, could slow to 2.3 percent this year from 6.1 percent in 2019, before bouncing back in 2021.
“The outbreak became a demand shock as people stayed home. It became a supply shock as companies suffered shortages of labor…and of materials as supply chains faltered,” ADB said.