The Cheat Sheet

The economic impact of the coronavirus pandemic

Venky Vembu | Updated on March 11, 2020

I bet it’s bad.

It is, given that the novel coronavirus is still virulently spreading around the world, and there is no clarity on how long it might be around and what extreme responses it might trigger in governments looking to contain the crisis.

Excessive paranoia isn’t helping, either.

Well, it’s hard to not to be paranoid when people are dying and the geographical spread of the virus has been astonishingly vast.

So, how bad is it?

At the first level, the number of deaths — over 4,300 and counting — is arguably an enormous loss. During previous outbreaks of pandemics, this human cost has sometimes been overlooked.

It has?

As a 2018 research paper Pandemic risk: How large are the estimated losses? by Victoria Fan (at the University of Hawaii), Dean Jamison (University of California), and Lawrence Summers (Harvard University), published in the Bulletin of the World Health Organization, noted, most previous economic studies on global influenza pandemics “focussed on income losses, through reductions in the size of the labour force and productivity, increase in absenteeism and…as the result of…measures that…disrupt economic activity.” The scholars reasoned that such estimates “exclude the value of changes in mortality risks to individuals.”

Seems a valid point.

It is, although as a World Economic Forum document from 2018 noted, advances in medicine and public health standards have meant that although the number of outbreaks is increasing, countries are better able to contain the morbidity and mortality effect of these events. At the same time, however, societal and economic impacts of infectious disease crises appear to be increasing, it added.

Economist Kaushik Basu reasons in a recent commentary that even if the current coronavirus epidemic is brought under control globally, it is likely to do much more economic damage than policymakers seem to realise.

Can we put a number on losses from epidemics?

A September 2019 report, A World At Risk: Annual report on global preparedness for health emergencies, prepared jointly by the WHO and the World Bank, estimated that a global influenza pandemic (similar in scale to the 1918 ‘Spanish flu’ pandemic, which infected over 500 million people) would cost the modern economy $3 trillion. Among the worst hit would be South Asia, whose GDP would drop by $53 billion, and Sub-Saharan Africa ($28 billion).

That sounds grim.

It does, although it bears saying that that is an outlier scenario. Epidemics impact a country’s economy through several channels: health, transportation, agricultural and tourism sectors. Indicatively, the International Air Transport Association (IATA) estimates that the global airline sector could lose $113 billion in sales if the coronavirus continues to spread. And since epidemics can disrupt international supply chains, trade, too, is impacted.

Are specific populations more at risk?

In a 2018 paper, Epidemics and Economics, in the IMF journal Finance & Development, David Bloom and others at Harvard University wrote that vulnerable populations, particularly the poor, are likely to suffer disproportionately as they may have less access to healthcare and lower savings to protect against financial catastrophe.


As author and philosopher Albert Camus wrote in The Plague, “Everybody knows that pestilences have a way of recurring in the world; yet somehow we find it hard to believe in ones that crash down on our heads from a blue sky.” That may sound fatalistic, but with proactive steps, the risk of epidemics can be managed, and the economic costs mitigated.

A weekly column that helps you ask the right questions

Published on March 12, 2020

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