The Impact of COVID-19 on Global Supply Chains and The Transport Sector

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by: Lauri Ojala

INTRODUCTION

The ”Big Picture” of COVID-19 impact on world economy in end-March 2020

OECD estimates on 2 March 2020 on the impact of COVID-19 on GDP for years 2020 and 2021

OECD Base scenario: temporary blow

• Severe, short-lived downturn in China, where GDP growth falls below 5% in 2020 after 6.1% in 2019, but recovering to 6.4% in 2021.

• In Japan, Korea, Australia, growth also hit hard then gradual recovery.

• Impact less severe in other economies but still hit by drop in confidence and supply chain disruption.

Domino scenario: broader contagion

• Intensity of China impact repeated in northern advanced economies severely hitting confidence, travel, and spending.

• Global growth could drop to 1.5 per cent in 2020, half the rate projected before the virus outbreak.

• Recovery much more gradual through 2021.

Global recession almost “inevitable” IESE Business School’s Nuno Fernandes on economic impact of COVID-19 ( 24 March 2020 )

• Service-oriented economies particularly negatively affected, with more jobs at risk

• Countries like Greece, Portugal, and Spain that are more reliant on tourism (more than 15% of GDP) will be more affected by this crisis

• Countries more reliant on exports will suffer disproportionally (e.g. Finland)

• The report also attempts a rough estimate of the potential global economic costs of COVID-19 under three different scenarios: a shutdown of 1.5 months (from mid-March to end of April), of 3

months (lasting until mid-June), and of 4.5 months (until end of July.)

• In a mild scenario an average impact of -3.5% of GDP is expected for all countries analyzed.

- The U.S. expected to enter into a recession, and the crisis is expected to cost it nearly 3% of its GDP

- Most European countries will face significant recessions, seeing contractions of their GDP of 2% to 3%, causing significantly increased unemployment

- China the only country with a GDP growth, slashed from a pre-crisis estimate of 6% to below 3%

• If crisis measures are extended, each additional month of shutdowns will cost 2%-2.5% of global GDP.

- If extreme COVID-19-related measures last until mid-June 2020, the U.S. will see its GDP fall almost 4%.

Italy and Germany will see their GDP fall close to 6%, and the UK more than 5%. ( Finland would suffer more)

• If it lasts until the end of July 2020, the average decline in GDP would be close to 8%. And the decrease in GDP could, in some cases, be higher than 10%.


link to material: https://www.ifors.org/wp-content/uploads/2020/04/COVID-19_Supply_Chain_Impacts_Ojala_UPDATE_20200401.pdf

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