Global COVID lockdowns may slash $30 trillion from world economy but a rapid lift could cost us dearly

Embargoed until: Publicly released:
Peer-reviewed: This work was reviewed and scrutinised by relevant independent experts.

Simulation/modelling: This type of study uses a computer simulation or mathematical model to predict an outcome. The original values put into the model may have come from real-world measurements (eg: past spread of a disease used to model its future spread).

International research on global supply chains has modelled the economic impact of global lockdowns from COVID-19 and found a 2 month lockdown of around 80 per cent can slash global GDP by around US$20 trillion, increasing to $30 trillion if the lockdown continues for 6 months. The authors found that supply chain losses increase as the number of countries imposing restrictions increase and that losses are more sensitive to the duration of a lockdown than its strictness. They say earlier, stricter and shorter lockdowns can minimise overall economic losses, but a ‘go-slow’ approach to lifting restrictions may reduce overall damages if it avoids the need for further lockdowns. The study also found that even if the virus and lockdowns had been confined to China, its economic impacts would not have been, with NZ experiencing a 2.2% value-added loss, under this scenario.

Journal/conference: Nature Human Behaviour

Link to research (DOI): 10.1038/s41562-020-0896-8

Organisation/s: Tsinghua University, Beijing, China

Funder: This study was supported by the National Natural Science Foundation of China (grant nos. 71988101, 91846301, 41629501 and 41921005), National Key R&D Program of China (grant no. 2016YFA0600104), the Czech Science Foundation under the project VEENEX (GA ČR no. 16-17978S). We acknowledge supports from the World Bank Group and Tsinghua University Initiative Scientific Research Program and donations from Delos Living LLC and the Cyrus Tang Foundation to Tsinghua University

Media release

From: Springer Nature

Economics: How lockdowns impact global supply chains *PRESS BRIEFING*

The duration of COVID-19-related lockdown measures and the number of countries in which they are implemented have a greater impact on global supply chains than the severity of the restrictions, according to a modelling study in Nature Human Behaviour. Global supply chains are the systems for the worldwide production and distribution of goods and services. The research also suggests that gradually easing containment measures that could eradicate the disease generates smaller losses than lifting restrictions quickly and then having to reintroduce lockdown.

The COVID-19 pandemic has now spread to nearly every country in the world and has led to containment measures including strict controls on travel, social interactions and commercial activity. Dabo Guan and colleagues used an economic disaster model to quantify the short-term effect of different containment methods on global supply chains and to investigate how pandemic-related losses will be distributed along supply chains.

The authors modelled 39 individual scenarios based on four sets of containment scenarios. Three sets were based on the geographical spread of the virus, duration of lockdown and strictness (the percentage by which labour and transportation availability is reduced relative to pre-pandemic levels). The fourth set modelled the potential impacts as lockdowns ease, including possible damage if restrictions were in place for a longer period of time or had to be reintroduced.

In a scenario in which a two-month lockdown of 80% strictness had been implemented only in China, the authors found that the supply chain effect would have been 3.5% of global GDP. However, this increased to 26.8% if the scenario were enforced globally. Increasing the duration of an 80% lockdown from 2 to 4 months increases the global economic losses from $20 trillion to $22.7 trillion. The authors also found that countries not directly affected by the virus experience large economic losses as a result of containment policies in affected countries and that low- and middle-income countries are particularly vulnerable to these indirect effects.

The authors modelled three recovery scenarios for the lifting of restrictions and found that lifting restrictions over a 12-month period with a 20% reduction in labour and transportation resulted in lower losses than lifting restrictions quickly and then having to reintroduce lockdown. They found that in the United States, forecast losses from lifting the restrictions slowly over 12 months were 24.6% to 54.8% less than if restrictions were lifted quickly and had to be reintroduced.

The authors also suggest that if the pandemic were to reoccur, shorter and stricter lockdowns, which may depend on global coordination, could reduce losses by around 11% globally. They argue that a global collective effort is required to eradicate the disease as well as minimise the economic impacts to national and global supply chains.

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