The Economic Impact of COVID-19

China, once the epicenter of the COVID-19 pandemic, appears to be turning a corner. As the number of reported local transmission cases hovers near zero, daily life is slowly returning to normal. However, economic data from the first two months of the year shows the damage done to the country’s finances.

Today’s visualization outlines the sharp losses China’s economy has experienced, and how this may foreshadow what’s to come for countries currently in the early stages of the outbreak.

A Historic Slump

The results are in: China’s business activity slowed considerably as COVID-19 spread.

*Excluding rural household investment

As factories and shops reopen, China seems to be over the initial supply side shock caused by the lockdown. However, the country now faces a double-headed demand shock:

• Domestic demand is slow to gain traction due to psychological scars, bankruptcies, and job losses. In a survey conducted by a Beijing financial firm, almost 65% of respondents plan to “restrain” their spending habits after the virus.
• Overseas demand is suffering as more countries face outbreaks. Many stores are closing up shop and/or cancelling orders, leading to an oversupply of goods.

With a fast recovery seeming highly unlikely, many economists expect China’s GDP to shrink in the first quarter of 2020—the country’s first decline since 1976.

Danger on the Horizon

Are other countries destined to follow the same path? Based on preliminary economic data, it would appear so.

The U.S.
About half the U.S. population is on stay-at-home orders, severely restricting economic activity and forcing widespread layoffs. In the week ending March 21, total unemployment insurance claims rose to almost 3.3 million—their highest level in recorded history. For context, weekly claims reached a high of 665,000 during the global financial crisis.

“…The economy has just fallen over the cliff and is turning down into a recession.”

—Chris Rupkey, Chief Economist at MUFG in New York

In addition, manufacturing activity in eastern Pennsylvania, southern New Jersey, and Delaware dropped to its lowest level since July 2012.

Globally
Other countries are also feeling the economic impact of COVID-19. For example, global online bookings for seated diners have declined by 100% year-over-year. In Canada, nearly one million people have applied for unemployment benefits.

Hard-hit countries such as Italy and Spain, which already suffer from high unemployment, are also expecting to see economic blows. However, it’s too soon to gauge the extent of the damage.

Light at the End of the Tunnel

Given the near-shutdown of many economies, the IMF is forecasting a global recession in 2020. Separately, the UN estimates COVID-19 could cause up to a $2 trillion shortfall in global income.

On the bright side, some analysts are forecasting a recovery as early as the third quarter of 2020. A variety of factors, such as government stimulus, consumer confidence, and the number of COVID-19 cases, will play into this timeline.

The Emissions Impact of Coronavirus Lockdowns

There’s a high chance you’re reading this while practicing social distancing, or while your corner of the world is under some type of advised or enforced lockdown.

While these are necessary measures to contain the spread of the COVID-19 pandemic, such economic interruption is unprecedented in many ways—resulting in some surprising side effects.

The Evidence is in NO₂ Emissions

Nitrogen dioxide (NO₂) emissions, a major air pollutant, are closely linked to factory output and vehicles operating on the road.

As both industry and transport come to a halt during this pandemic, NO₂ emissions can be a good indicator of global economic activity—and the changes are visible from space.

These images from the Centre for Research on Energy and Clean Air (CREA), as well as satellite footage from NASA and the European Space Agency (ESA), show a drastic decline in NO₂ emissions over recent months, particularly across Italy and China.

NO₂ Emissions Across Italy

In Italy, the number of active COVID-19 cases has surpassed China (including the death toll). Amid emergency actions to lock down the entire nation, everything from schools and shops, to restaurants and even some churches, are closed.

Italy is also an industrial hub, with the sector accounting for nearly 24% of GDP. With many Italians urged to work from home if possible, visible economic activity has dropped considerably.

This 10-day moving average animation (from January 1st—March 11th, 2020) of nitrogen dioxide emissions across Europe clearly demonstrates how the drop in Italy’s economic activity has impacted the environment.

Source: European Space Agency (ESA)

That’s not all: a drop in boat traffic also means that Venice’s canals are clear for the time being, as small fish have begun inhabiting the waterways again. Experts are cautious to note that this does not necessarily mean the water quality is better.

NO₂ Emissions Across China

The emissions changes above China are possibly even more obvious to the eye. China is the world’s most important manufacturing hub and a significant contributor to greenhouse gases globally. But in the month following Lunar New Year (a week-long festival in early February), satellite imagery painted a different picture.

Source: NASA Earth Observatory

NO₂ emissions around the Hubei province, the original epicenter of the virus, steeply dropped as factories were forced to shutter their doors for the time being.

What’s more, there were measurable effects in the decline of other emission types from the drop in coal use during the same time, compared to years prior.

Back to the Status Quo?

In recent weeks, China has been able to flatten the curve of its total COVID-19 cases. As a result, the government is beginning to ease its restrictions—and it’s clear that social and economic activities are starting to pick back up in March.

Source: European Space Agency (ESA)

With the regular chain of events beginning to resume, it remains to be seen whether NO₂ emissions will rebound right back to their pre-pandemic levels.

This bounce-back effect—which can sometimes reverse any overall drop in emissions—is [called] “revenge pollution”. And in China, it has precedent.

—Li Shuo, Senior climate policy advisor, Greenpeace East Asia