Research: Ukraine could lose $53.5 billion to COVID-19 in worst-case scenario

In a worst-case scenario, Ukraine could lose $53.5 billion in gross domestic product because of the COVID-19 pandemic and the economic consequences of the quarantine restrictions,  according to new research by the Kyiv School of Economics, Ukraine’s leading business school.

Such a loss would amount to roughly a third of Ukraine’s GDP, which stood at $150.4 billion in 2019.

The research is predicated on the scenario that the coronavirus is not seasonal and will not slow its spread in summer 2020. In that case, the government can either continue the quarantine or lift it.

KSE researchers calculated that continued quarantine would cost the economy $53.5 billion in 2020 based on the current GDP growth forecasts by the Ministry of Economy (–4.2%) and the International Monetary Fund (–7.7%).

Under this scenario, they concluded that, had Ukraine lifted the quarantine on May 12, the economy would have lost about $54 billion due to roughly 120,000 more people dying of the disease in the country by the end of the year. Instead, the government extended the lockdown to June 22 while gradually easing restrictions since May 11.

They calculated the losses from not continuing the quarantine using the “value of statistical life” methodology. They estimated that losing one life costs about $454,000 to the Ukrainian economy. By that measure, 120,000 deaths from COVID-19 would convert into about $54 billion in losses. So far, Ukraine has lost less than 600 lives as of May 21.

“If so, then it’s better to save lives because the economic calculations show that it doesn’t matter whether to impose quarantine or not,” Tymofiy Mylovanov, president of KSE and Ukraine’s former economy minister, said in an online presentation of the research.

However, as with all predictions about COVID-19, there are some serious caveats.

In more favorable scenarios where the virus slows its spread in the summer, fewer people would die and the economy would lose less than $53.5 billion, the research indicates.

“If we won’t have the black scenario, but a yellow or a green one, then the quarantine should be lifted,” Mylovanov says. “Of course, it should be adaptive, regional, smart.”

At the same time, when calculating losses from not continuing the quarantine, the research did not include losses to social service budgets due to expenditures to help COVID-19 patients and their families, Mylovanov said. If these were included, the losses from not continuing the quarantine could be even higher.

Ukraine’s GDP decreased by 1.5% in the first quarter of 2020, according to the State Statistics Service, but the economic decline is accelerating in the second quarter.

The economic crisis caused by the novel coronavirus pandemic is expected to become the largest since the Great Depression of 1929-30, according to the International Monetary Fund. A few months ago, the international organization expected GDP to be growing in 160 countries. Now, it expects it to fall in 170 countries worldwide.