The Potential Impact of COVID-19 on GDP and Trade : A Preliminary Assessment
The virus that triggered a localized shock in China is now delivering a significant global shock. This study simulates the potential impact of COVID-19 on gross domestic product and trade, using a standard global computable general equilibrium mode...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/295991586526445673/The-Potential-Impact-of-COVID-19-on-GDP-and-Trade-A-Preliminary-Assessment http://hdl.handle.net/10986/33605 |
| Summary: | The virus that triggered a localized
shock in China is now delivering a significant global shock.
This study simulates the potential impact of COVID-19 on
gross domestic product and trade, using a standard global
computable general equilibrium model. It models the shock as
underutilization of labor and capital, an increase in
international trade costs, a drop in travel services, and a
redirection of demand away from activities that require
proximity between people. A baseline global pandemic
scenario sees gross domestic product fall by 2 percent below
the benchmark for the world, 2.5 percent for developing
countries, and 1.8 percent for industrial countries. The
declines are nearly 4 percent below the benchmark for the
world, in an amplified pandemic scenario in which
containment is assumed to take longer and which now seems
more likely. The biggest negative shock is recorded in the
output of domestic services affected by the pandemic, as
well as in traded tourist services. Since the model does not
capture fully the social isolation induced independent
contraction in demand and the decline in investor
confidence, the eventual economic impact may be different.
This exercise is illustrative, because it is still too early
to make an informed assessment of the full impact of the
pandemic. But it does convey the likely extent of impending
global economic pain, especially for developing countries
and their potential need for assistance. |
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