Pandemic divergence: A short note on COVID-19 and global income inequality

Abstract

In this paper we provide an initial assessment of the economic losses related to the COVID pandemic in two ways: as output contractions in 2020-2021, and as growth revisions (the estimated cumulative output loss in 2020-2030 based on growth forecasts before and after COVID). We find that, whereas the immediate GDP impact seems to favour poorer countries that were less intensely hit by the virus, the long-term economic cost was much larger and correlates negatively with the country´s initial per capita GDP, worsening global income inequality. The note identifies empirically some of the key drivers of these country differences (informality, tourism dependence, fiscal space) and provides broader estimates of COVID-related economic loss that incorporate the costs associated with fiscal stimuli, excess deaths and education lockdowns.