Global | Calibrating long-Covid vulnerabilities in 162 economies

We estimate overall long-term economic scarring will be slightly higher in emerging markets (EMs) than in advanced economies (AEs). Although AEs are underperforming EMs in the most important predictor of scarring (the crisis year hit to GDP growth); scarring amplifiers are bigger in EMs: labour market rigidities, economic structure, financial imbalances, and limits to fiscal support.

What you will learn:

  • Evidence from 82 previous severe epidemics suggests that five-year trend growth falls by 3ppts compared to the pre-crisis trend.
  • Our model of these cases suggests the hit to trend growth increases in proportion to crisis-year hit to GDP growth. The experience after the Global Financial Crisis is similar, though far more severe, partly because of the need to repair balance sheets.
  • Our detailed scorecard, based on 31 metrics, reveals that long-Covid scars will vary widely across economies in a way that’s masked by EM-AE or regional splits.

Topics: Emerging markets, Coronavirus, Advanced economies