The Economic Impact of the COVID-19 Outbreak on Developing Asia

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What is COVID-19?

A new coronavirus disease, now known as COVID-19, was first identified in Wuhan, People’s Republic of China (PRC), in early January 2020. From the information known at this point, several facts are pertinent. First, it belongs to the same family of coronaviruses that caused the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003 and the Middle East Respiratory Syndrome (MERS) outbreak in 2012. Second, the mortality rate (number of deaths relative to the number of cases), which is as yet imprecisely estimated, is probably in the range of 1%–3.4%—significantly lower than 10% for SARS and 34% for MERS (Table 1, first column), but substantially higher than the mortality rate for seasonal flu, which is less than 0.1%.2 Third, even though it emerged from animal hosts, it now spreads through human-to-human contact. The infection rate of COVID-19 appears to be higher than that for the seasonal flu and MERS, with the range of possible estimates encompassing the infection rates of SARS and Ebola (Table 1, second column).

1 The authors of this brief are Abdul Abiad, Mia Arao, Suzette Dagli, Benno Ferrarini, Ilan Noy, Patrick Osewe, Jesson Pagaduan, Donghyun Park, and Reizle Platitas. The work has benefited from comments received from numerous colleagues across the Asian Development Bank (ADB).
2 An analysis published in JAMA ( of 72,314 cases in the PRC found an overall case fatality rate of 2.3%, with much higher fatality rates for those aged 70–79 (8.0%) and those aged 80 and above (14.8%).

The number of confirmed COVID-19 cases has risen rapidly, first in the PRC and more recently worldwide, quickly surpassing the totals from SARS. As of end-February 2020, COVID-19 had infected 85,403 people in 55 economies, with a global death toll of 2,924. The PRC still accounts for the vast majority—97% of total fatalities and 93% of total cases (Figure 1). As of early March, however, the number of confirmed cases outside the PRC has been rising, particularly in the Republic of Korea (3,150), Italy (888), and Iran (388). Despite having a similar infection rate yet lower fatality rate than SARS, total cases and fatalities from COVID-19 have already far surpassed the totals for the 2003 SARS outbreak (Figure 2).

This brief summarizes ADB analysis of the global, regional, and economy- and sector-specific economic impact of the COVID-19 outbreak. It lays out the various channels through which economies will be affected and quantifies the likely magnitudes of the effects under a range of scenarios. It is explicit about the scenario assumptions, and the methods used to calculate the impact. Importantly, the brief provides estimates not only of the global and regional impacts, but also granular details on how individual economies—and sectors within economies—will be affected, including under an illustrative worst-case scenario for an economy that experiences a significant outbreak. The brief concludes by summarizing the actions ADB and its developing member countries (DMCs) are taking to respond to the COVID-19 outbreak.

Economic activity will be affected in many ways

There are several channels through which the COVID-19 outbreak will affect economic activity in the PRC, the rest of developing Asia, and the world. 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); and effects on health such as increased disease and mortality as well as shifts in health care spending. Each of these are taken in turn.

Consumption in the PRC will experience a sharp, temporary drop, as occurred during the 2003 SARS outbreak. Perhaps the most important channel through which economic activity is affected is through a sharp but temporary decline in domestic consumption in the PRC resulting from behavioral and/or policy changes—people staying home as a precaution, or because they are told to. This occurred during the SARS outbreak in 2003; retail sales growth in the PRC declined by almost 3 percentage points (pp) during the second quarter of 2003 (Figure 3). The size of the consumption shock in the current outbreak could be


bigger than that experienced in 2003, depending on the length and severity of the outbreak and the policy responses taken. In a scenario where the outbreak is more protracted, expands its geographic reach, and/or becomes a recurring phenomenon that affects future business activity materially, a decline in investment is also possible.

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