Covid-19: ADB warns global cost of coronavirus could top $4 trillion

The coronavirus pandemic could cost the global economy 4.1 trillion dollars as it ravages the United States, Europe, and other major economies, warned Friday by the Asian Development Bank. The predicted effect is equal to almost five percent of world production based on a variety of scenarios. Still, the lender said losses from "the worst pandemic in a century" could be higher.

 

by Niranjani Jesentha Kumari Prabagararaj

Updated: Apr 03, 2020 14:05 IST

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Crisis has caused financial markets to spin

The projected impact may be an underestimate, as the study excludes alternate mechanisms such as ... possible social and financial problems, and long-term effects on health care and education, "the ADB said.

The crisis has caused financial markets to spin as traders are worried about the long-term effect on the global economy, while governments and central banks have stepped in to ease the suffering, pledge more than $5 trillion in stimulus and loosen monetary policy. Officially confirmed COVID-19 cases worldwide exceeded the 1 million mark on Thursday, with tens of thousands killed, though alerts remain ongoing, as the disease spreads rapidly.

With billions of people in lockdown and economies at a standstill, the ADB said Asia is expected to expand 2.2% this year, its slowest rate since an increase of 1.7 percent during the 1998 Asian financial crisis.

No one can tell how widely the COVID-19 pandemic can spread, and containment could take longer than currently expected, "said Yasuyuki Sawada, chief economist of the ADB." The risk of extreme financial instability and financial crises can not be excluded.

However, the risk for more outbreaks persists, and the extent of the pandemic remains unknown. 

"Outcomes could be worse than expected, and growth may not recover as quickly," the bank said. Growth in China, the largest economy in the world, could slow from 6.1 percent in 2019 to 2.3 percent this year before bouncing back in 2021.

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