COVID-19 Pandemic and its Economic Impact on the Global Economy: A Computable General Equilibrium Approach

Abstract

Introduction: The COVID-19 pandemic, caused by the novel coronavirus SARS-CoV- 2, has been a global health crisis since its emergence in late 2019, impacting all aspects of life worldwide. It has revealed vulnerabilities in healthcare systems while also inspiring scientific advancements and cooperation in developing vaccines, highlighting the importance of preparedness and equitable healthcare for future challenges. Method: This paper evaluates the economic impact of the COVID-19 pandemic on the global economy. The study employed the Global Trade Analysis Project model using GTAP database version 10A with 2014 as the base year. The database's 141 regions and 65 sectors are aggregated into 20 regions and 29 sectors. The model used involves a baseline and two policy scenarios. The baseline scenario projected the global economy to 2020 from 2014 using macroeconomic variables, such as real GDP, population, capital stock, and labor supply. Policy scenarios 1 and 2 accounted for the impact of the COVID-19 pandemic and fiscal stimulus package, respectively. Result: The impacts of the pandemic are measured in real GDP, welfare, export and import volumes, trade balance, and output by sector. Simulation results indicate that the real GDP for all regions declined. The impact of COVID-19 on the welfare of countries, including Korea, Japan, the US, Mexico, China, Italy, and Great Britain, varied. In all these countries, the pandemic highlighted existing inequalities and vulnerabilities, affecting countries disproportionately. Government interventions, such as stimulus packages, income support programs, and vaccination campaigns, have aimed to mitigate the impact and support the welfare of the population. The pandemic disrupted global supply chains and increased trade costs, thereby negatively impacting both import and export volumes. The output of some sectors, such as tourism-related sectors, was heavily affected. Conclusion: The COVID-19 pandemic has impacted real GDP, welfare, export and import volumes, trade balance, and output by sector. By examining the specific implications of the pandemic on each of these economic factors, policymakers and researchers can gain valuable insights into the challenges faced and potential avenues for recovery.