Economic impact

PUBLISHED
SEPTEMBER, 27TH 2021

From the beginning it was clear that COVID would have a huge impact on the economy.
The magnitude of impact was obviously unknown at the beginning and even today it is largely uncertain. Well over 1½ years after the first COVID infection the impact is still unfolding, and understanding even the past true impact of COVID on our economies is a challenge.

The photos from the six focus countries give us new perspectives in how they have been affected by COVID. There are obvious differences given the hugely different development stages in these countries. But there are also similarities given the underlying causes and reactions. In the corresponding analyses we estimate the economic impact on the macro level in each country. We also investigate the impact of school closings which would have long term consequences on development. Finally, we delve into country specific sectors to understand the impact on micro level; for example the impact on tourism in Italy, the impact on housing & construction in Ethiopia.

At this stage we obviously cannot have a complete understanding of the impact of COVID on our economies. Nonetheless the insights here are already useful to mitigate the impact of COVID in the coming years and are also relevant for other pandemics in the further future.

COUNTRIES INVOLVED

ETHIOPIA

JAPAN

INDIA

ISRAEL

ITALY

NETHERLANDS

Covid-19 Magnifies Challenges Facing Ethiopia’s Construction Sector.

The construction sector has been among the key drivers of economic growth in Ethiopia for the past decade, contributing 20% to national GDP (2018/19) and providing an important source of employment. The sector owes much of its success to the government’s ambitious infrastructure development plans with millions of dollars pumped in social housing, roads, higher learning institutions and dams. Total employment in the sector is estimated to be 2.2 million mainly comprising temporary and unskilled workers. Amid the growth though, stakeholders have for long been observing various challenges facing the construction industry – ranging from mounting debt to difficulty in sourcing the right materials, mainly cemente. The Covid-19 pandemic has exacerbated the situation, which created a challenge for its main actors, especially daily labourers . The Government’s Job Creation Commission initial estimates at least 60% of the projects in construction would cease due to lack of financial liquidity, with all temporary workers in these projects. such as daily laborers, to be laid-off. The commission also estimated that due to the pandemic 741,000 employees, or representing 34% of total employment in the sector, could be laid off from this sector during April – June 2020.
The expectation was based on the pandemic’s direct impact of the global demand shock, as well as the supply shock due to social distancing measures.
No sooner had the Delta region of south Bengal recovered from the devastating impact of Cyclone Amphan in 2020 during the first wave of the Pandemic in India than a potent tidal wave during Cyclone Yaas in 2021 during the second wave of the Pandemic destroyed what remained. Unable to counter the force of the tidal wave, embankments crumbled in hundreds of coastal villages, thereby inundating agricultural fields, wiping away homes and lives. The ongoing Pandemic had already made life difficult for most families due to loss of livelihood from the recurrent lockdowns. This cyclone gravely exacerbated the situation. With food reserves at home destroyed and debts accumulating, the young men from the families are already leaving in search of work elsewhere in the country. Being forced to seek shelter in dense cramped cyclone shelters has also directly led to an increase in Covid-19 cases. In this land where cyclonic events of great magnitude are getting increasingly frequent, the present and the future indeed looks bleak.

CLAUDIO MAJORANA

Economic impact / Tourism

Tourism is the activity of people travelling and staying in places outside their usual environment. Holidays in 2021 show a different trend and there is a clear preference by Italians for domestic destinations. Confirmation that the Covid emergency has influenced the choice of location is shown by the fact that as many as 33 per cent of Italians on holiday stay within their own region and only 6 per cent plan to go abroad. The desire to travel is inhibited by economic difficulties, fear of contagion and uncertainty about the future. Local attractions, as places in the nature, often attract many young people who enjoy spending time outdoor without affording the costs of a more expensive holiday.

ESMEE VAN ZEEVENTER

After 25 years Beatrix closed her shop last year, in the middle of the pandemic. She was the owner of the ‘condom shop.’ Not a sex shop, but a store for buying all kinds of different condoms. It was a small shop hidden away, in a not-so-known-city: Enschede. Beatrix was working there herself every day, until she had to close the store due to the pandemic and ended up at home. Together with a pile of condoms, chocolate penises on the kitchen table, and the cash register in the attic.

COVID and economic impact: a Gupta Strategists analysis

CONCLUSION

The complete economic impact of COVID is complex to determine for several reasons. COVID is still with us and our response to it is still unpredictable, recovery could be better or worse than expected, and it is nearly impossible to isolate the effect of COVID on its own. Even with these uncertainties we believe these three conclusions are likely to uphold:

1. Impact of COVID is unprecedented:
COVID has had the most impact on GDP-development across the world when compared to all other impactful events since 1900 (e.g., World War II, financial crisis)

2.Impact of COVID is disparate:
For some countries COVID has had nearly no economic impact at all so far, for other countries the impact is likely to over 200% of the current GDP (cumulative till 2030)

3.Impact of COVID is highly specific:
Certain sectors (e.g., tourism) were hit hard by COVID and are still recovering, other categories were barely impacted. Each country has its own sector specific impact. The coming years will bring better understanding of these turbulent times. And that in turn will help to mitigate the impact on societies in the future. But for now, we can conclude that the impact of COVID on our economies is clearly unprecedented, disparate and specific.

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