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Evaluating the initial impactof COVID-19 containment measures on economic activity
Novel Coronavirus
Acceso Abierto
Relaciones económicas internacionales
Economía de la salud
The increasing spread of the coronavirus across countries has prompted many governments to introduce unprecedented measures to contain the epidemic. These are priority measures that are imposed by a sanitary situation, which leave little room for other options as health should remain the primary concern. These measures have led to many businesses being shut down temporarily, widespread restrictions on travel and mobility, financial market turmoil, an erosion of confidence and heighted uncertainty.In a rapidly changing environment, it is extremely difficult to quantify the exact magnitude of the impact of these measures on GDP growth, but is clear that they imply sharp contractions in the level of output, household spending, corporate investment and international trade. This note provides illustrative estimates of the initial direct impact of shutdowns, based on an analysis of sectoral output and consumption patternsacross countriesand an assumption of common effects within each sector and spending categoryin all countries. This approach suggests that the initial direct impact of the shutdowns could be a decline in the level of output of between one-fifth to one-quarter in many economies, with consumers’ expenditure potentially dropping by around one-third.Changes of this magnitude would far outweigh anything experienced during the global financial crisis in 2008-09. This broad estimate only covers the intial direct impact in the sectors involved and does not take into account any additional indirect impactsthat may arise.These are only the initial impacts on the level of output. The implications for annual GDP growth will depend on many factors, including the magnitude and duration of national shutdowns, the extent of reduced demand for goods and servicesin other parts of the economy, and the speed at which significant fiscal and monetary policy support takes effect. Nonetheless, it is clear that the impact of the shutdowns will weaken short-term growth prospects substantially.The scale of the estimated decline in the level of output is such that it is equivalent to a decline in annual GDP growth of up to 2 percentage points for each month that strict containment measures continue. If the shutdown continued for three months, with no offsetting factors, annual GDP growth could be between 4-6 percentage points lower than it otherwise might have been.
Organisation for Economic Co-operation and Development (OECD)
Documento de trabajo
Epidemia COVID-19
Público en general
Versión publicada
publishedVersion - Versión publicada
Appears in Collections:Materiales de Consulta y Comunicados Técnicos

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