Assessing the Economic Consequences of Covid-19

Abstract

The COVID-19 pandemic has caused significant disruptions in the global economy. By the end of the first quarter of 2020, the COVID-19 pandemic had brought international travel to an abrupt halt and significantly impacted the tourism industry. For many developed and developing countries, the tourism sector is a major source of employment, government revenue and foreign exchange earnings. Without this vital lifeline, many countries may experience a dramatic contraction in GDP and a rise in unemployment. Using a computable general equilibrium model (GTAP), we assess the implications of the COVID-19 crisis on the tourism sector. Depending on the duration of the global lockdown, the paper estimates the direct and indirect costs of the shutdown for 65 individual countries and regions and 65 sectors, covering the global economy. In some countries, unemployment could rise by more than 20 percentage points and some sectors could nearly be wiped out if the duration of the tourism standstill is up to one year. Further the paper puts forward policy recommendations for governments to avert the worst effects and facilitate recovery.