The covid-19 pandemic has created a dual crisis: A health shock and an economic crunch. The two risks, however, are distinct and the severity of one does not determine the severity of the other, a new VoxEU article argues.
Some countries that are experiencing lower levels of morbidity and mortality may suffer very adverse economic consequences while the opposite could occur for those with high mortality rates, Ilan Noy of Victoria University of Wellington and others argue.
It is, therefore, crucial not to focus solely on the infection and mortality rate in a country when evaluating the potential economic hit from the pandemic.
They show that the economic risk from covid-19 is not located in Northern Italy or New York City, where the severity of the health crisis is the highest. Such a risk is higher in countries with low income and healthcare quality, particularly those located in South and Southeast Asia and Africa, despite a lower infection rate.
The authors measure the overall economic risk based on the exposure of a country to the pandemic, its vulnerability, based on population density, as well as its resilience or ability to recover from the shock.
A country’s financial and institutional capacity to implement extensive fiscal spending and lending schemes is also considered a key determinant of its economic resilience.
The health hazard in India, measured as the ratio of confirmed cases to population, seems to be among the lowest in the world, according to this research. Despite this, the economic risk is among the highest. This is also true for most of Africa and Southeast Asia.
However, if the past economic risk of communicable diseases in each country is also taken into account, Southeast Asian countries appear to be at a relatively lower risk, the authors find. India and most countries in Sub Saharan Africa still emerge as the most vulnerable.
Also read: The economic risk from COVID-19 is not where COVID-19 is