Coronavirus could slash global GDP output by almost 5 per cent amid ‘severe financial turmoil’, ADB says

03/4 2020 17:45

Coronavirus pandemic could cost the global economy almost 5 per cent of gross domestic product, Asian Development Bank says
Lender cuts China’s 2020 growth forecast to 2.3 per cent from 6 per cent in September last year

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

A shorter containment period could limit the damage to $2 trillion, or 2.3 per cent of world output, the Manila-based lender said in its Asian Development Outlook report. Developing Asia, , accounts for 22 per cent to 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 estimated 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 epicentre of the virus has shifted from China to Europe and the US, with the number of global infections now topping 1 million.

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 subregions will see weaker growth this year, according to the report.

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