Coronavirus could cost global economy $4.1tn, ADB Says

Asian Development Bank cut its 2020 growth forecast for Asia to 2.2% from 5.5%

People stand on the lines drawn to maintain safe distance as they wait to receive free food being distributed by Central Reserve Police Force (CRPF) during a 21-day nationwide lockdown to slow the spreading of coronavirus disease (COVID-19) in Chennai, India, April 1, 2020. REUTERS/P. Ravikumar TPX IMAGES OF THE DAYShow less

The cost of the coronavirus pandemic could be as high as $4.1 trillion (Dh15.05tn), or almost 5 per cent of global gross domestic product, depending on the disease’s spread through Europe, the US and other major economies, the Asian Development Bank said.

A shorter containment period could limit the damage to $2tn, or 2.3 per cent of world output, the Manila-based lender said in its Asian Development Outlook report released on Friday. Developing Asia, including China, accounts for as much as 36 per cent of the pandemic’s total cost, it said.

“No one can say how widely the Covid-19 pandemic may spread, and containment may take longer than currently projected,” Yasuyuki Sawada, the ADB’s chief economist, said in the report. “The possibility of severe financial turmoil and financial crises cannot be discounted.”

On March 6, the ADB had said the virus outbreak could cost the world economy $347 billion, and cut the global growth rate by as much as 0.4 percentage point. Since then, the epicenter of the virus has shifted from China to Europe and the US, with the number of global infections now topping 1 million.

The new estimate released on Friday takes into account the immediate impact on tourism, consumption and investment, Mr Sawada said in an interview with Bloomberg TV’s Haslinda Amin and Yvonne Man. The cost could rise further if supply-side disruptions materialise, he said.

In the report, the ADB cut its 2020 growth forecast for Asia to 2.2 per cent from 5.5 per cent estimated in September last year. China’s forecast was slashed to 2.3 per cent from 6 per cent, and compares with 6.1 per cent growth last year. All of developing Asia’s sub-regions will see weaker growth this year, according to the report.

Tourism and commodity dependent nations including Thailand “will suffer most” from the pandemic, Mr Sawada said in the interview. If the disease can be contained within three to six months, the economic recovery could also be quicker, he said.

Inflation is likely to accelerate due to higher food costs, even as weaker economic activity and softer commodity prices mitigate any price spikes, before easing in 2021, the ADB said in the report.