A recent OECD publication shows the economic disruption that is ahead of us. It looks as if the demand tap has been turned off with the lockdown with only essential services available. Some countries could see GDP being reduced by up to 29% – see graph. The majority of the impact comes from the loss of retail and wholesale trade although there are also notable cross-country differences in some sectors.
- Germany (DEU) – 29% – closures of car industry
- New Zealand – 28% – decline in tourist and leisure activities
Extending the same approach to other economies suggests that the impact effect of business closures could result in reductions of 15% or more in the level of output throughout the advanced economies and major emerging-market economies after the full implementation of confinement measures.
Many countries in which tourism is relatively important could potentially be affected more severely by shutdowns and limitations on travel.
At the other extreme, countries with relatively sizeable agricultural and mining sectors, including oil production, may experience smaller initial effects from containment measures, although output will be subsequently hit by reduced global commodity demand. As New Zealand has also got a significant primary sector does this graph over estimate the impact on its economy?