Coronavirus Could Cost Pakistan $4.95 Billion in a “Worst Case Scenario”: ADB

The coronavirus (COVID-19) outbreak could cost Pakistan’s economy between $16.387 million to $4.95 billion, or 0.01 to 1.57 percent of the gross domestic product (GDP), said the Asian Development Bank (ADB).

ADB released a study “COVID-19 Outbreak to Have Significant Economic Impact on Developing Asia” yesterday, where it mentioned several scenarios such as best case, moderate case, worse-case and the hypothetical worst-case to assess the impact of COVID-19 on various developing countries in Asia.

COVID-19’s impact is categorized on different sectors including agriculture, mining and quarrying, business, trade, personal, and public services, hotels and restaurants, and other personal services, light/heavy manufacturing, utilities, and construction and transport services.

The magnitude of the economic losses will depend on how the outbreak evolves, which remains highly uncertain. The range of scenarios explored in the analysis suggests a global impact in the range of $77 billion to $347 billion, or 0.1 percent to 0.4 percent of global GDP.

In the best-case scenario, the impact on Pakistan will be limited to $16.387 million, or 0.01 percent. In the moderate case scenario, the outbreak in China is more widespread and lasts longer, with travel bans and precautionary behavior abating only after three months.

In such a scenario, the impact on Pakistan will be $34.12 million.

In the worst case, the impact of COVID-19 will widen to $60.81 million, or 0.02 percent of GDP. In the hypothetical worse case the impact of COVID-19 will widen further and may cause $4.95 billion or 1.57 percent of GDP, putting 0.9 million people out of jobs.

The report maintained that the ongoing novel coronavirus (COVID-19) outbreak will have a significant impact on developing Asian economies through numerous channels, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions, and health effects.

“There are many uncertainties about COVID-19, including its economic impact,” said ADB Chief Economist Yasuyuki Sawada.

This requires the use of multiple scenarios to provide a clearer picture of potential losses. We hope this analysis can support governments as they prepare clear and decisive responses to mitigate the human and economic impacts of this outbreak.

There are several channels through which the COVID-19 outbreak will affect economic activity. 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);
  • Effects on health such as increased disease and mortality as well as shifts in health care spending.