Coronavirus pandemic may shrink global economy by 5% causing a loss of $4.1 trillion, says ADB
A new Asian Development Bank estimate has determined the pandemic's impact on the world economy if it goes on for 6 months
With the coronavirus lockdown closing most industries and services, the global economy has taken an inevitable hit, with the Asian Development Bank estimating the pandemic will cost the world economy almost $4.1 trillion - nearly 5% of its total economic activity.
The ADB said on Friday that the figure is based on the health emergency lasting 6 months or more and added that the losses could be worse still.
"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," ADB's chief economist Yasuyuki Sawada said.
The Manila-based regional lender in its report said that the growth rates with regard to the development of Asia would decline to 2.2% in 2020, less than half of last year's growth rate of 5.2%.
The biggest economy in the continent, China, has so far experienced a decline by double-digit figures in business-related activity in the January-February time frame. By the end of the year, growth rates are expected to fall to 2.3%, in comparison to last year's 6.1%, which was already the lowest in three decades, according to the bank.
Europe saw a record deficit of activity in manufacturing and services, suggesting a 10% annualised drop in GDP for the 19-country eurozone.
Airlines were given April 3 as the deadline to file for a share of $25 billion as federal grants to cover payroll for the next six months. Only American and Southwest have made known their intentions to abide, while other airlines are still hesitant.
A provision in the aid could also enable the US government to take an equity stake in carrier companies that seek grants or loans. Either way, airlines have taken a huge blow. Even the number of travelers that went through screenings in airports nationwide on April 2 amounted to 124,000, which is at least 95% lesser compared to the same day last year.
Automobile giant Toyota is ceasing production at five of its 18 plants in Japan for three days, as sales have dissipated. Although, one of its plants will remain shut until mid-April. The affected plants are those that produce vehicles for worldwide export, like the Lexus luxury car models and Prius hybrid. Honda Motor Co. and other Japanese automobiles companies have also halted productions.
The US automotive industry has completely shutdown. The auto industry in Germany reported that new car registrations within the country dwindled by at least 38% in March alone, in comparison to the previous year. This has been its worst decline since the German reunification 30 years ago.
Phuket, Thailand's famous resort island and tourist destination, has closed the doors of its hotels to the public, following the Thai government's orders. This is a major blow to the Thai economy, the major portion of which comprises tourism revenue from over 10 million visitors to the country annually.
Hotels that are still hosting guests are advised to stay open until they leave, and immediately reveal names and number to the district offices so they can be screened for their health status. Any guests that test positive or display symptoms for the COVID-19 disease will be transported to state-designated health facilities and closely monitored. All land and sea entry routes and exits in Phuket have been closed off as well.
China's central bank said on April 3 that it was decreasing the amount of cash that banks must hold as a reserve and dispensing 400 billion Chinese Yuan ($56.38 billion) in liquid assets to boost the economy, which has been crippled by the pandemic.
For the first time in three decades, the second-largest economy looks to be on the verge of plummeting.
Yan Se, chief economist at Founder Securities, said, “The deterioration of the global economy is bound to have a great impact on China’s economy, which requires that China’s policy should be further loosened and be more flexible."