The Potential Impact of COVID-19 on GDP and Trade: A Preliminary Assessment

26 Pages Posted: 13 Apr 2020 Last revised: 28 Nov 2022

See all articles by Maryla Maliszewska

Maryla Maliszewska

World Bank

Aaditya Mattoo

World Bank - Development Research Group (DECRG)

Dominique van der Mensbrugghe

World Bank

Date Written: April 10, 2020

Abstract

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.

Keywords: International Trade and Trade Rules, Transport Services, Public Health Promotion, Business Cycles and Stabilization Policies, Pulp & Paper Industry, Textiles, Apparel & Leather Industry, General Manufacturing, Food & Beverage Industry, Common Carriers Industry, Construction Industry, Plastics & Rubber Industry

Suggested Citation

Maliszewska, Maryla and Mattoo, Aaditya and van der Mensbrugghe, Dominique, The Potential Impact of COVID-19 on GDP and Trade: A Preliminary Assessment (April 10, 2020). World Bank Policy Research Working Paper No. 9211, Available at SSRN: https://ssrn.com/abstract=3573211

Maryla Maliszewska (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Aaditya Mattoo

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, N.W.
Room MC 3-327
Washington, DC 20433
United States
202-458-8047 (Phone)
202-676-9810 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/amattoo

Dominique Van der Mensbrugghe

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-0052 (Phone)
202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/dvandermensbrugghe

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
7,543
Abstract Views
18,174
Rank
1,328
PlumX Metrics