Economic impact

 

The [email protected] over five years from COVID-19 could range from $3.3 trillion to $82 trillion, says the Centre for Risk Studies.

The [email protected] over the next five years from the coronavirus pandemic could range from an optimistic loss of $3.3 trillion (0.65 per cent of five-year GDP) under a rapid recovery scenario to $82.4 trillion (16.3 per cent) in an economic depression scenario, says the Centre for Risk Studies at the University of Cambridge Judge Business School.

Under the current mid-range consensus of economists, the [email protected] calculation would be $26.8 trillion or 5.3 per cent of five-year GDP, says a “COVID-19 and business risk” presentation prepared by the Centre for Risk Studies.

Under the Risk Centre’s projections, the [email protected] in the United States would range from $550 billion (0.4 per cent of five-year GDP) to $19.9 trillion (13.6 per cent), in the United Kingdom from $96 billion (0.46 per cent) to $3.5 trillion (16.8 per cent), and in China from $1.03 trillion (0.9 per cent) to $19.2 trillion (16.5 per cent).

The Risk Centre developed the [email protected] metric in recent years and has applied it to measure the potential loss from a range of events ranging from natural disaster to cyber attacks to pandemics.

“[email protected] was designed as a constant metric that can be used to compare and standardise different types of threat,” says Dr Andrew Coburn, Chief Scientist at the Risk Centre in Cambridge. “The new calculations on [email protected] from the pandemic are not forecasts, but rather are projections based on various plausible scenarios that could unfold in the next five years related to the economic impact of COVID-19.”

The four scenario levels examined for their economic impact are:

• L1: An Optimistic Recovery Path scenario in which pent-up demand fuels a rapid economic recovery with overshoot on the rebound, with short-term results better than currently expected
• L2: Consensus Economic Forecast – the mid-range of forecasts by economic experts, now calling for a slow recovery curve with some period of economic growth before the recovery process
• L3: Pessimistic Outlook of structural damage to the economy and a lengthy period of recession
• L4: Economic Depression Scenario of a long-term recession with the economy tipped into depression, with “worst-case” estimates by economists and negative assumptions such as severe second waves of infection or protectionist politics.

The Centre for Risk Studies projections are based on 2019 GDP of $69.2 trillion for the world’s 19 leading economies and a baseline GDP over the next five years of $507 trillion. The Centre for Risk Studies has made its projections available to the public at the Cambridge Business Risk Hub.