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The ongoing COVID-19 outbreak affects the People's Republic of China (PRC) and other developing Asian economies in numerous ways, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions, and health effects.
The magnitude of the economic impact will depend on how the outbreak evolves, which remains highly uncertain. Rather than focusing on a single estimate, it is important to explore a range of scenarios, assess the impact conditions of these scenarios to materialise, and to update the scenarios as needed.
The range of scenarios explored in the ADB brief suggests a global impact of $77-347 billion or 0.1-0.4 per cent of global GDP, with a moderate case estimate of $156 billion or 0.2 per cent of global GDP. Two-thirds of the impact falls on the PRC, where the outbreak has been concentrated so far.
The estimated impact on individual developing Asian economies – and on sectors within these economies – is provided in the brief, including a hypothetical worst-case scenario for a given economy that experiences a significant outbreak of its own.
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. These include a 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; spillovers 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); and effects on health such as increased disease and mortality as well as shifts in healthcare spending. Each of these is taken in turn.
The Asian Development Bank (ADB) developing members that will be significantly affected are those with strong trade and production linkages with the PRC. In addition to tourism-dependent economies, other developing Asian economies such as Hong Kong, China; Mongolia; the Philippines; Singapore; Taipei, China; and Vietnam will be materially affected by the COVID-19 outbreak. Many of these economies see a significant share of tourists from the PRC and are affected through that channel as well.
According to the latest report of ADB announced yesterday (March 6), Vietnam is forecast to sustain a damage of around 0.41 per cent of GDP, much better than other developing economies like Taipei (0.44 per cent), Singapore (0.57), Mongolia (0.74), PRC (0.76), Hong Kong (0.85), Thailand (1.11), Cambodia (1.59), and the Maldives (2.05).