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Cling Together, Swing Together: The Contagious Effects of COVID-19 on Developing Countries through Global Value Chains
[working paper]
Corporate Editor
Deutsches Institut für Entwicklungspolitik gGmbH
Abstract This paper aims at estimating the economic vulnerability of developing countries to
disruptions in global value chains (GVCs) due to the COVID-19 pandemic. It uses data on
trade in value-added for a sample of 12 developing countries in sub-Saharan Africa, Asia
and Latin America to assess their de... view more
This paper aims at estimating the economic vulnerability of developing countries to
disruptions in global value chains (GVCs) due to the COVID-19 pandemic. It uses data on
trade in value-added for a sample of 12 developing countries in sub-Saharan Africa, Asia
and Latin America to assess their dependence on demand and supply from the three main
hubs China, Europe, and North America. Using first estimates on COVID-19-induced
changes in production and sectoral final demand, we obtain an early projection of the GDP
effect during the lockdowns that runs through trade in GVCs. Our estimates reveal that
adverse demand-side effects reduce GDP by up to 5.4 per cent, and that collapsing foreign
supply is responsible for a drop in GDP of a similar magnitude. Overall, we confirm
conjecture that the countries most affected are those highly integrated into GVCs (Southeast
Asian countries). We argue, however, that these countries also benefit from a well-
diversified portfolio of foreign suppliers, leading to a cushioning of economic downswing
from adverse supply-side spillovers, because COVID-19 stroke major hubs at different
times during the first wave in early 2020. Moreover, despite expected hazardous home
market effects, sub-Saharan Africa’s GDP appears to be comparatively less affected though
GVCs due to a lack of intensive supply- and demand-side dependencies.... view less
Keywords
developing country; Africa South of the Sahara; Southeast Asia; Latin America; epidemic; consequences; interdependence; globalization; value chain; production; national trade and industry; commerce; international economic relations; supply; demand; service; health care
Classification
Political Economy
Free Keywords
COVID-19; Epidemie/Pandemie; Folgenabschätzung; Interdependenz/Verflechtung; Internationaler Handel; Angebot an Gütern und Dienstleistungen; Nachfrage nach Gütern und Dienstleistungen
Document language
English
Publication Year
2020
City
Bonn
Page/Pages
28 p.
Series
DIE Discussion Paper, 21/2020
DOI
https://doi.org/10.23661/dp21.2020
ISSN
2512-8698
Status
Published Version; reviewed