'Winners' and 'losers' from Covid-19

Topics Coronavirus | China | IMF

Sometimes, I like to construct a table and look at it for a while to see what key features emerge. If a picture is worth a thousand words, a good table can sometimes be equal to a few hundred, and worth sharing with readers. This is one of those columns where the table is the story. It draws, principally, from the latest (April, 2021) issue of the IMF’s World Economic Outlook (WEO) and its projections of economic growth for 2021 and 2022. The lens through which I am looking at this data is to explore who may be the “winners” and “losers”, in relative terms, from the pandemic disaster, which has plagued the world since the end of 2019. Let me emphasise one important caveat upfront: The discussion is limited to numbers on growth and levels of GDP. There are many other consequences of the Covid shock, notably, on employment, incomes, poverty and health, which are elided.


In an absolute sense, there are no winners from Covid, only losers. World GDP fell by nearly 4 per cent in 2020 and despite a strong recovery in 2021 is likely to be only 2 per cent higher in 2021 than it was in 2019. Absent Covid, world output would probably have been 6-7 per cent higher over the two years, suggesting that 4-5 per cent of global GDP will be irretrievably lost. Every region and country had negative growth in 2020, with the solitary and extraordinary exception of China. And even China suffered a major deceleration in growth that year.


Covid’s economic impact across the world in 2020 varied, for many reasons, including, of course, differences in income levels, health systems, policy responses and the geographic spread of the pandemic over time. A glance at the first column of the table shows that, among regions, Europe and Latin America suffered the biggest losses of output, falling by 6 per cent in the former and 7 per cent in the latter. Asia’s marginal dip of 1 per cent output loss is mainly due to a remarkable, offsetting positive growth in the giant Chinese economy. Sub-Saharan Africa’s output loss of only 2 per cent is a surprise, given the low incomes, the prevalence of civil wars and weak health systems. As for countries, the big losers in 2020 were the UK (with a nearly 10 per cent plunge in output), Mexico (-8.4 per cent), India (-7.3 per cent) and South Africa (-7 per cent). World trade in goods and services collapsed by over 8 per cent.


If the initial economic shock in 2020 varied across economies, so did the recovery in 2021, as shown by the second and fourth columns of the table. The world economy is expected to register one of its best growth years on record (admittedly from a reduced base), thanks to strong monetary and fiscal stimuli in the US and Europe, the acceleration of increasingly effective mass vaccination programmes in these countries, remarkably robust growth (above 8 per cent) in China and a good recovery in Africa and most of Asia (minus China). World GDP is projected to expand at nearly 6 per cent and world trade by over 8 per cent.  US growth, after registering only a 3.5 per cent fall in 2020, is expected to surge back at more than 6 per cent, setting a record over many years. Europe, on the other hand, will experience a more muted recovery from a deeper trough in the previous year. Latin America will see a similarly modest recovery, whereas Developing Asia is expected to post over 8 per cent growth, powered by the remarkable expansion in China, and reasonably good recoveries in India and the ASEAN-5 (Indonesia, Malaysia, the Philippines, Thailand and Vietnam). Africa’s GDP will rise by more than it fell in the previous year.


As a result of these disparate developments, the level of GDP in 2021 in the US and Africa will be a bit higher than in 2019, and substantially higher in Developing Asia. In marked contrast, in both Europe and Latin America, GDP in 2021 will still be 2-3 per cent lower than in 2019. Amongst countries, the UK, Mexico and South Africa are expected to attain GDP levels in 2021 that are still significantly lower than what they enjoyed in 2019, marking these nations as clear “losers” from the Covid trauma (this will also be true of several of the countries constituting the European Union). On the other hand, Japan, Brazil, India, ASEAN-5 and Nigeria are expected to have attained GDP levels close to what they enjoyed two years previously. Far and away the biggest “winner” will be China, with its 2021 GDP projected to be 10-11 per cent higher in 2021 than in 2019. It is surely ironic, that the country where the pandemic once originated is likely to be in this enviable pole position.


The last column of the table presents projected levels of GDP in 2022 as compared with 2019. That is, if the GDP growth projections for 2021 and 2022 turn out to be correct, which is often not the case with IMF projections! China is once again the winner by far, with 2022 GDP projected to be 17 per cent higher than in 2019. There is no other country which comes even close to this extraordinary, anticipated surge. The US and the ASEAN-5 trail behind with output increments (over three years) of 6 and 7.5 per cent, respectively. And no other country is expected to have GDP more than 5 per cent higher in 2022 (compared to 2019), though India and Russia come close.


 To sum up, if these GDP projections prove correct, then, in relative terms, China may prove to be the clear “winner” from the Covid-19 disaster, US and ASEAN-5 do reasonably well, while Europe, UK, Mexico and South Africa are the clear “losers” …and India is among the also-rans in the middle of the pack. />


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