How is Covid-19 affecting Asian economies?

The spread of the COVID-19 coronavirus disease has caused great concern to the global community. Governments and authorities are finding it challenging to contain the spread of COVID-19 and the resulting impact on their national economies. Although the COVID-19 coronavirus disease has a lower mortality rate than Severe Acute Respiratory Syndrome (SARS) and the Middle East Respiratory Syndrome (MERS) outbreak, it has affected global economic activity adversely and is resulting in several scenarios that can take place in the future.
According to “The Economic Impact of the COVID-19 Outbreak on Developing Asia” paper in ADB Briefs Vol 128, which was published by the Asian Development Bank (ADB) on Mar 6, 2020, a new coronavirus disease, now known as COVID-19, was first identified in Wuhan, People’s Republic of China (PRC), in early January 2020. It belongs to the same family of coronaviruses that caused the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003 and the Middle East Respiratory Syndrome (MERS) outbreak in 2012. The mortality rate, which is as yet imprecisely estimated, is probably in the range of 1%-3.4%, significantly lower than 10% for SARS and 34% for MERS, but substantially higher than the mortality rate for seasonal flu, which is less than 0.1%. There were over 114,300 cases of coronavirus and 4,026 deaths across 112 countries and regions as of 10th March 2020 at 0200 GMT, according to a Reuters tally.
There are several channels through which the COVID-19 outbreak will affect economic activity in the PRC, the rest of developing Asia, and the world:
• Sharp but temporary decline in domestic consumption in the PRC and other outbreak-affected economies, and possibly investment if the outbreak affects views on future business activity
• Declines in tourism and business travel
• Spillover of weaker demand to other sectors and economies through trade and production linkages
• Supply-side disruptions to production and trade (which are distinct from demand-side shocks spilling over through trade and production linkages)
• Effects on health such as increased disease and mortality as well as shifts in health care spending
Given the unpredictable evolution of the COVID-19 outbreak, ADB explored several scenarios that could take place:
• Best-case scenario: The PRC outbreak is contained relatively quickly, with travel bans and precautionary behaviour abating after 2 months (measured from late January, when the outbreak intensified and quarantines as well as travel and other restrictions were imposed); there is a moderate and relatively short-lived decline in the PRC’s consumption growth of 2.75pp in one quarter only, or 0.7pp for the year relative to a no-outbreak scenario (the size of the retail sales growth decline during the quarter of the SARS episode, relative to previous quarters).
• Moderate scenario: The PRC outbreak is more widespread and lasts longer, with travel bans and precautionary behaviour abating only after 3 months; there is a larger decline in the PRC’s consumption growth of 2pp for the year, relative to a no-outbreak scenario.
• Worse-case scenario: The PRC outbreak is even more protracted, with precautionary behaviour and restrictive policies remaining in place for 6 months; there is a large decline in both consumption and investment growth in the PRC, with both down by 2pp relative to a no-outbreak scenario.
The scenarios explored here suggests a global impact ranging from $77 billion to $347 billion or 0.1% to 0.4% of global GDP, with a moderate-case estimate of $156 billion or 0.2% of global GDP (Table 3). Across all three scenarios, the PRC accounts for roughly two-thirds of the global impact; in the moderate scenario the loss to the PRC relative to a no-outbreak scenario is $103 billion, or close to 0.8% of the PRC’s GDP. The rest of the impact on the global economy is split roughly equally between the impact on the rest of developing Asia, and on the rest of the world. The rest of developing Asia would experience a loss of $22 billion or 0.24% of its GDP under the moderate-case scenario.
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