University of Cambridge

No country ‘immune’ to COVID-19 economic shock, but Asian nations will bounce back faster

2-Dec-2020 7:40 AM EST, by University of Cambridge

Global GDP will drop three percent below pre-pandemic estimates by the end of 2021, with many Western nations seeing “deeper and longer-lasting” effects compared to China and other Asian economies, a study suggests.  

Moreover, nations that adopted less stringent lockdowns – Sweden, for example – will not be shielded from the economic losses of COVID-19 either, owing to spillovers from other countries.

Published by the National Bureau of Economic Research, the macroeconomic study captures the economic volatility caused by the last forty years of “rare events”. It uses this historical data to forecast the longer term effects of the pandemic on individual economies.  

The research suggests that economic growth will be stymied in at least 80% of the world’s advanced nations and many emerging market economies due to “excess global uncertainty”.   

Two Cambridge economists conducted the study with an international team of researchers. They argue that the pandemic will lead to a “significant fall in world output” – the consequences of which could last much of the dawning decade.

“The COVID-19 pandemic is a global shock like no other, involving simultaneous disruptions to both supply and demand in an interconnected world economy,” said co-author Dr Kamiar Mohaddes, a Cambridge Judge Business School economist.

“Infections reduce labour supply and productivity, while lockdowns, business closures, and social distancing also cause supply disruptions. On the demand side, redundancy and the loss of income from death, quarantines, and unemployment plus worsened economic prospects reduce household consumption and firms’ investment.”

The study from Mohaddes, a Fellow of King’s College at Cambridge, and colleagues, including M. Hashem Pesaran, Fellow of Trinity College, uses the IMF’s GDP growth forecast revisions between January and April 2020 to identify the COVID-19 economic shock.

The research team created a model of 33 countries covering 90% of the global economy, using data from 1979 onwards – in particular the rare economic shocks – to predict the range of GDP loss likely to be suffered by each nation and region as a result of the pandemic. The study accounts for the “nonlinear” effects of global economic volatility.

“The techniques developed in this study are intended to capture the effects of rare events such as COVID-19, and account for interconnections and spillovers between countries and markets,” said Mohaddes, who worked with colleagues from the International Monetary Fund, Johns Hopkins University and the Federal Reserve Bank of Dallas.  

The study suggests that the US and the UK are likely to experience deeper and longer-lasting effects, while China has more than a 50% chance of its economy improving far quicker than its major western counterparts. The odds for the Euro area are “skewed negatively”, but it’s likely to experience a speedier and sturdier recovery than the US by the end of 2021.

“Pulled by China, most of the emerging economies in Asia have a higher chance of performing better than the global average,” said Mohaddes. He argues that China and others in the region may fare better globally thanks to their manufacturing bases.

Economies with strong service industries have proved resilient in the past as manufacturing was more exposed to market fluctuations, but COVID-19 and the digital age have turned this on its head: services suffer as people stay at home en masse while goods are still traded through online platforms.

“Non-Asian emerging markets stand out for their vulnerability, and will suffer from a significant output collapse in 2020, with a less than 30% chance of not experiencing an output loss by the end of 2021. Turkey, South Africa, and Saudi Arabia will almost certainly see at least eight quarters of severely depressed economic activity,” Mohaddes said.  

The study pays close attention to Mohaddes’ home nation of Sweden, where the government took a markedly different approach, with little in the way of the mandatory social distancing and lockdowns adopted by most countries.

“The Swedish economy will also see a large fall in GDP, very similar to other European economies,” he said.

“Our estimates for Sweden illustrate that no country is immune to the economic fallout of the pandemic, because of interconnections and the global nature of the shock.”

The study predicts lower interest rates in core advanced economies – about 100 basis points or 1 percentage point below pre-COVID rates. “The crisis raises precautionary savings and dampens investment demand,” said Mohaddes.

However, he warns that the same cannot be said with certainty about emerging market economies in regions such as Latin America, where borrowing rates can increase rapidly, with implications for “debt servicing”.    

The study’s calculations involve both the “temporal and cross-sectional dimensions” of data that take into account real and financial drivers of economic activity, as well as common factors such as oil prices and global volatility. Country-specific models include output growth, the real exchange rate, as well as real equity prices and long-term interest rates when available.

Added Mohaddes: “Given its unprecedented nature, any analysis of COVID-19 has to go beyond identifying the economic shock and account for its non-linear effects and cross-country spillovers, as well as the uncertainty surrounding forecasts. This is what we address with our econometric model.”

SEE ORIGINAL STUDY




Filters close

Showing results

110 of 4573
Released: 15-Jan-2021 5:40 PM EST
Research Links Social Isolation to COVID-19 Protocol Resistance
Humboldt State University

As health officials continue to implore the public to wear masks and practice social distancing, recent research by Humboldt State University Psychology Professor Amber Gaffney provides key insights into connections between social isolation, conspiratorial thinking, and resistance to COVID-19 protocols.

Newswise: Rapid blood test identifies COVID-19 patients at high risk of severe disease
Released: 15-Jan-2021 5:35 PM EST
Rapid blood test identifies COVID-19 patients at high risk of severe disease
Washington University in St. Louis

Scientists at Washington University School of Medicine in St. Louis have shown that a relatively simple and rapid blood test can predict which patients with COVID-19 are at highest risk of severe complications or death. The blood test measures levels of mitochondrial DNA, which normally resides inside the energy factories of cells. Mitochondrial DNA spilling out of cells and into the bloodstream is a sign that a particular type of violent cell death is taking place in the body.

Released: 15-Jan-2021 2:55 PM EST
COVID-19 deaths really are different. But best practices for ICU care should still apply, studies suggest.
Michigan Medicine - University of Michigan

COVID-19 deaths are indeed different from other lung failure deaths, according to two recent studies, with 56% of COVID-19 patients dying primarily from the lung damage caused by the virus, compared with 22% of those whose lungs fail due to other causes. But, the researchers conclude, the kind of care needed to help sustain people through the worst cases of all forms of lung failure is highly similar, and just needs to be fine-tuned.

Released: 15-Jan-2021 2:50 PM EST
45% of adults over 65 lack online medical accounts that could help them sign up for COVID-19 vaccinations
Michigan Medicine - University of Michigan

As the vaccination of older adults against COVID-19 begins across the country, new poll data suggests that many of them don’t yet have access to the “patient portal” online systems that could make it much easier for them to schedule a vaccination appointment. In all, 45% of adults aged 65 to 80 had not set up an account with their health provider’s portal system.

Released: 15-Jan-2021 1:30 PM EST
New England Journal of Medicine publishes COVID-19 treatment trial results
University of Texas at San Antonio

A clinical trial involving COVID-19 patients hospitalized at UT Health San Antonio and University Health, among roughly 100 sites globally, found that a combination of the drugs baricitinib and remdesivir reduced time to recovery, according to results published Dec. 11 in the New England Journal of Medicine.

Released: 15-Jan-2021 12:40 PM EST
DNA test can quickly identify pneumonia in patients with severe COVID-19, aiding faster treatment
University of Cambridge

Researchers have developed a DNA test to quickly identify secondary infections in COVID-19 patients, who have double the risk of developing pneumonia while on ventilation than non-COVID-19 patients.

Released: 15-Jan-2021 12:30 PM EST
Fight CRC To Present Research Findings on The Impact of COVID-19 on the Colorectal Cancer Community at 2021 GI ASCO
Fight Colorectal Cancer

Fight Colorectal Cancer presents abstract at Gastrointestinal Cancer Symposium highlighting the need to address the barriers and opportunities for care within the colorectal cancer community during the COVID-19 pandemic

Released: 15-Jan-2021 12:25 PM EST
Technion to Award Honorary Doctorate to Pfizer CEO Dr. Albert Bourla
American Technion Society

Israel's Technion will award an honorary doctorate to Pfizer CEO and Chairman Dr. Albert Bourla, for leading the development of the novel vaccine against SARS-CoV-2, the virus that causes COVID-19. The honorary doctorate will be conferred at the Technion Board of Governors meeting in November 2021.

Released: 15-Jan-2021 11:30 AM EST
UW researchers develop tool to equitably distribute limited vaccines
University of Wisconsin-Madison

Researchers at the University of Wisconsin School of Medicine and Public Health and UW Health have developed a tool that incorporates a person’s age and socioeconomic status to prioritize vaccine distribution among people who otherwise share similar risks due to their jobs.


Showing results

110 of 4573

close
1.36699