“On average, every month of lockdown results in output loss of around 8.5 per cent of the annual total. Hence, if 75 per cent of the economy is locked down for a month, then the output loss will around 6.5 per cent. A three week lockdown – as is the case currently – should result in an output loss of close to 4.5 per cent,” Nomura says.
Even when the lockdown period ends, it will take time for the economy to be fully up and running. The public fear factor, analysts feel, will still result in below-normal activity for a few more months. That apart, there will be lingering effects in private consumption and corporate investment demand, all of which will impact the financial sector, especially banks.
“Clearly, for the first time in living memory, many industries/SMEs will be running on zero revenues for close to a month. Even the ‘opening up’ after the lockdown is likely to be measured (lest a ‘second wave’ hits back). This means that there will be a permanent impact of this 21-day shutdown even into the longer-term numbers,” says Sunil Tirumalai, head of research at Emkay Global.
Barclays pegs the 21-day shutdown cost at around $120 billion, or 4 per cent of GDP. “We are shaving down our calendar year 2020 (CY20) GDP forecast from 4.5 per cent to 2.5 per cent and FY20-21 forecast to 3.5 per cent (from 5.2 per cent earlier),” their analysts wrote in a recent report.