Early View Article - Measuring the Economic Risk of COVID‐19

Measuring the Economic Risk of COVID‐19

We measure the economic risk of COVID‐19 at a geo‐spatially detailed resolution. In addition to data about the current prevalence of confirmed cases, we use data from 2014–2018 and a conceptual disaster risk model to compute measures for exposure, vulnerability, and resilience of the local economy to the shock of the epidemic. Using a battery of proxies for these four concepts, we calculate the hazard, the principal components of exposure and vulnerability to it, and of the economy’s resilience (i.e. its ability of the recover rapidly from the shock). We find that the economic risk of this pandemic is particularly high in most of Sub‐Saharan Africa, South Asia, and Southeast Asia. These results are consistent when comparing an ad hoc equal weighting algorithm for the four components of the index, an algorithm that assumes equal hazard for all countries, and one based on estimated weights using previous aggregated disability‐adjusted life years losses associated with communicable diseases.

Policy Implications

  • Most of the economic risks from COVID‐19 are in countries and regions that do not get much global attention in this pandemic – Sub‐Saharan Africa, South Asia, and Central Asia.
  • Since the economic and public health risks are distinct, the evaluation and design of policies to ameliorate them should be pursued separately.
  • The framework we use also suggests that attempts to reduce the economic risk of epidemics should focus on reducing the exposure and vulnerability of our economies to this risk, and on increasing their resilience.
  • Our public health systems have been caught by surprise by this virus, but that is even more true for our social and economic policy institutions.
  • We need to make sure that our economic policy making mechanisms are prepared for the economic risk of future pandemics.

 

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