Global economy could suffer USD8.8T loss: ADB

Azlan Othman

The gross domestic product (GDP) in Southeast Asia will go down by USD163 billion to USD252 billion (4.6 per cent to 7.2 per cent) this year, the Asian Development Bank (ADB) said last Friday.

The ADB also said that the total package of the interim measures made by the Brunei government in the form of long-term direct lending to businesses, households, and state/local/regional governments, and forbearance amounted to BND450 million or USD318,122,912.

Meanwhile ADB also said that the global economy could suffer between USD5.8 trillion and USD8.8 trillion in losses — equivalent to 6.4 per cent to 9.7 per cent of global gross domestic product (GDP) — as a result of the novel coronavirus disease (COVID-19) pandemic, said the new report.

During a press conference last month, the Ministry of Finance and Economy (MoFE) on behalf of the Autoriti Monetari Brunei Darussalam (AMBD) and Brunei Association of Banks (BAB) announced additional steps to the interim measures taken by the Brunei Government in aiding various micro, small and medium enterprises (MSMEs) and individuals affected by the COVID-19 pandemic.

Minister at the Prime Minister’s Office and Minister of Finance and Economy II Dato Seri Setia Dr Awang Haji Mohd Amin Liew bin Abdullah revealed that these steps include an additional economic relied package introduced on April 1, in total amounting to approximately BND250 million in the form of deferment of principal or loan repayment and exemption of fees and charges.

This measure, combined with previously announced fiscal assistance – such as deferment of payments on the Employees Trust Fund (TAP) and Supplemental Contributory Pension (SCP) contributions and increasing the capacity of workers – including business productivity, will boost the economic stimulus package for Brunei Darussalam for COVID-19, totalling BND450 million.

A worker walks past inside the Asian Development Bank (ADB) headquarters in Manila. PHOTO: AFP

The ADB report, Updated Assessment of the Potential Economic Impact of COVID-19, finds that economic losses in Asia and the Pacific could range from USD1.7 trillion under a short containment scenario of three months to USD2.5 trillion under a long containment scenario of six months, with the region accounting for about 30 per cent of the overall decline in
global output.

Governments around the world have been quick in responding to the impacts of the pandemic, implementing measures such as fiscal and monetary easing, increased health spending, and direct support to cover losses in incomes and revenues.

Sustained efforts from governments focussed on these measures could soften COVID‑19’s economic impact by as much as 30 per cent to 40 per cent, according to the report. This could reduce global economic losses due to the pandemic to between USD4.1 trillion and
USD5.4 trillion.

“This new analysis presents a broad picture of the very significant potential economic impact of COVID-19,” said ADB Chief Economist Yasuyuki Sawada. “It also highlights the important role policy interventions can play to help mitigate damage to economies. These findings can provide governments with a relevant policy guide as they develop and implement measures to contain and suppress the pandemic, and lessen its impacts on their economies and people.”

Under the short and long containment scenarios, the report notes that border closures, travel restrictions, and lockdowns that outbreak-affected economies implemented to arrest the spread of COVID-19 will likely cut global trade by USD1.7 trillion to USD2.6 trillion.

Global employment decline will be between 158 million and 242 million jobs, with Asia and the Pacific comprising 70 per cent of total employment losses. Labour income around the world will decline by USD1.2 trillion to USD1.8 trillion — 30 per cent of which will be felt by economies in the region, or between USD359 billion and USD550 billion.

Apart from increasing health spending and strengthening health systems, strong income and employment protection are essential to avoid a more difficult and prolonged economic recovery.

Governments should manage supply chain disruptions; support and deepen e-commerce and logistics for the delivery of goods and services; and fund temporary social protection measures, unemployment subsidies, and the distribution of essential commodities — particularly food — to prevent sharper falls in consumption, the report said.