ADB Assesses the Economic Impact of COVID-19 Outbreak in GMS Countries

ADB Assesses the Economic Impact of COVID-19 Outbreak in GMS Countries

The Asian Development Bank (ADB) report “Economic Impact of the COVID-19 Outbreak on Developing Asia” outlines how the COVID-19 outbreak will affect economic activity in developing Asian economies, including countries in the Greater Mekong Subregion (GMS) by assessing factors including 

• temporary decline in domestic consumption and investment 

• 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; and 

• effects on health, such as increased disease and mortality as well as shifts in health care spending.

GMS members to be significantly affected are those with strong trade and production linkages with the People’s Republic of China (PRC), and those that see a significant share of tourists from the PRC and generate significant income through this sector. These countries include Cambodia, the Lao People’s Democratic Republic (PDR), Thailand, and Viet Nam. 

The ADB Brief assesses different impact scenarios— ‘Best, Moderate, and Worse’ cases—dependent on how the outbreak evolves. The table below summarizes the estimated impact of COVID-19 on GMS countries most likely to be affected:

 

	Best case	Moderate case	Worse case
	losses in $ millions	losses in $ millions	losses in $ millions
Cambodia	$283 million	$391 million	$711 million
Lao PDR	$27 million	$39 million	$77 million
Thailand	$3,809 million	$5,601 million	$10,934 million
Viet Nam	$675 million	$1,013 million	$1,919 million
World	$76,693 million	$155,948 million	$346,975 million
PRC	$43,890 million	$103,056 million	$236,793 million

Download the Covid-19 Economic Impact Assessment Template

Impact on Tourism

The ADB Brief also estimates how the Covid-19 outbreak will impact tourism, which is an important source of revenue for many economies, GMS countries included. The impact is felt more significantly because visitors from the PRC comprise a significant share of tourists in many economies. In 2018, tourists from the PRC accounted for more than a quarter of total tourist arrivals in countries including Myanmar, Thailand, Viet Nam, and Cambodia.

In the GMS, estimated to be most affected is Cambodia, followed by Thailand, Viet Nam, Lao PDR, and Myanmar. This impact is measured by loss in GDP. Summarized below is the projected impact on these GMS countries, as well as impact on the whole of PRC: 

 

	Best case		Moderate case		Worse case
	as % of GDP in $ millions	losses in $ millions	as % of GDP in $ millions	losses in $ millions	as % of GDP in $ millions	losses in $ millions
Cambodia	-1.409	-345.7	-1.929	-473.4	-3.490	-856.5
Thailand	-0.845	-4,265.8	-1.224	-6,180.2	-2.361	-11,923.5
Viet Nam	-0.432	-1,059.2	-0.614	-1,504.6	-1.158	-2,840.6
Lao PDR	-0.164	-29.5	-0.231	-41.5	-0.431	-77.4
Myanmar	-0.149	-106.3	-0.224	-159.4	-0.448	-318.8
PRC	-0.112	-15,241.6	-0.149	-20,215.0	-0.258	-35,135.3

Spillover Impact and Long-term Economic Effects Based on Health Impact

The PRC is the world’s second-largest economy, and accounts for one-third of global growth. Thus, drop in demand for goods and services can spill over to other sectors and economies through trade and production linkages. 

The Brief also notes that further disruptions will be felt on other important channels, such as supply-side disruptions. More importantly, the Brief cautions there may be significant long-term economic effects through COVID-19’s health impacts on mortality and morbidity, and through changes in, as well as diversion of, health care expenditures. ADB’s April 2020 edition of the Asian Development Outlook will be publishing updated estimates. Longer-term impacts on health, education, and other outcomes will be looked at as well in subsequent reports.

ADB’s Response in the GMS

On 7 February, ADB announced it is providing $2 million additional support for the technical assistance “Strengthening Regional Health Cooperation in the Greater Mekong Subregion.” The supplementary financing supports the enhancement of detection, prevention, and response to the COVID-19 outbreak in the PRC and the GMS. 

ADB also announced another $2 million on 26 February to support response in all its developing members; and a CNY130 million ($18.6 million) private sector loan, signed on 25 February, to Wuhan, PRC-based pharmaceutical distributor Jointown Pharmaceutical Group Co. Ltd. will support the continued supply of essential medicines and personal protective equipment.

On its News Release, ADB emphasized that it “stands ready to provide further support to its developing members in their efforts to respond to the adverse impact of COVID-19. ADB will use appropriate means to address the identified needs including through existing and new financial assistance, emergency assistance lending, policy-based lending, private sector investment, and knowledge and technical assistance.”

Visit the ADB page on COVID-19 and the ADB Brief for the full analysis by ADB’s economics team.

 

ADB’s Scenario Matrix