Impact of COVID-19 on China's macroeconomy and agri-food system – an economy-wide multiplier model analysis

Abstract

<jats:sec><jats:title content-type="abstract-subheading">Purpose</jats:title><jats:p>The purpose of this study is to assess the potential economic cost of the COVID-19 pandemic on China's macroeconomy and agri-food system and provide policy recommendations to stimulate economic growth and agri-food system development.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Design/methodology/approach</jats:title><jats:p>An economy-wide multisector multiplier model built on China's most recent social accounting matrix (SAM) for 2017 with 149 economic sectors is used to assess the impact of COVID-19 on China's macroeconomy and agri-food system. SAM multiplier analysis focuses on supply chain linkages and captures the complexity of an interconnected economy.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Findings</jats:title><jats:p>The paper finds that both the macroeconomy and agri-food systems are hit significantly by COVID-19. There are three main findings. First, affected by COVID-19, GDP decreased by 6.8% in the first quarter of 2020 compared with that in 2019, while the economic loss of the agri-food system is equivalent to 7% of its value added (about RMB 0.26 trillion). More than 46<jats:italic>m</jats:italic> agri-food system workers (about 27% of total employment) lost their jobs to COVID-19 in the lockdown phase. The COVID-19 affects the employment of unskilled labor more than that of skilled labor. Second, when the economy starts to recover during the second and third quarters, the growth rate in the value added of the agri-food system turns positive but still modest. Many jobs resume during the period, but the level of agri-food system employment continues to be lower than the base. The agri-food system employment recovery is slower than that of other sectors largely due to the sluggish recovery of restaurants. Agri-food system employment drops by 8.6<jats:italic>m</jats:italic>, which accounts for about 33% of the total jobs lost. Third, although the domestic economy is expected to be normal in the fourth quarter, external demand still faces uncertainties due to the global pandemic. The agri-food system is projected to grow by 1.1% annually in 2020 with resuming export demand, while only by 0.4% without resuming export demand. These rates are much lower than an annual growth rate of 4.3% for the agri-food system in 2019. The results also show that, without resuming export demand, China's total economy will grow less than 1% in 2020, while, with export demand resumed, the growth rate rises to 1.7%. These rates are much lower than an annual GDP growth rate of 6.1% in 2019.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Practical implications</jats:title><jats:p>The results show that continuously reducing economic dependency on exports and stimulating domestic demand are key areas that require policy support. The agri-food system can play an important role in supporting broad economic growth and job creation as SMEs are major part of the AFS. Job creation requires policies to promote innovation by entrepreneurs who run numerous SMEs in China.</jats:p></jats:sec><jats:sec><jats:title content-type="abstract-subheading">Originality/value</jats:title><jats:p>This paper represents the first systematic study assessing the impact of COVID-19 on China's agri-food system in terms of value added and employment. The assessment considers three phases of lockdown, recovery and normal phases in order to capture the full potential cost of COVID-19.</jats:p></jats:sec>

The influence of COVID-19 on agricultural economy and emergency mitigation measures in China: A text mining analysis

“…Zhang et al [ 4 ] pointed out that the COVID-19 has the potential to impact nearly every facet of the agricultural industry, including the massive unsalable agricultural products, the low development of livestock sector, the blocked supply of agricultural products, the obstruction of agricultural product trade, the decrease in farmers' income, and the increase in poverty in rural areas. Zhang et al [ 5 ] analyzed the impact of COVID-19 on China's food supply and nutrition security. They pointed out that the hiccup in food and nutrition security is not severe in the short term because of the sufficient stocked food before the outbreak.…”

Haloculture: A system to mitigate the negative impacts of pandemics on the environment, society and economy, emphasizing COVID-19

“…Nevertheless, according to reports in different countries of the world, it can be concluded that the impact of COVID-19 on agriculture has been lower than other economic sectors such as tourism, industry, and construction ( Diao and Wang, 2020 ; Maliszewska et al, 2020 ; Zhang et al, 2020 ). Diao and Wang ( Diao and Wang, 2020 ) estimated the declines in GDP due to COVID-19 in the construction, services, industry, manufacturing and agriculture sectors in Myanmar at 82%, 56%, 52%, 40% and 14%, respectively.…”

“…Diao and Wang ( Diao and Wang, 2020 ) estimated the declines in GDP due to COVID-19 in the construction, services, industry, manufacturing and agriculture sectors in Myanmar at 82%, 56%, 52%, 40% and 14%, respectively. Zhang et al (2020) estimated that under the influence of COVID-19, China's GDP fell 6.8% in the first quarter of 2020 compared to 2019, while the agri-food system's economic loss equaled 7% of its value added. As China's economy recovered in the second and third quarters of 2020, the growth rate of the value-added agri-food system increased, but remained moderate.…”

“…The situation is particularly serious in less developed countries. Moreover, the economic crisis in these countries is severe since the economy is both stagnant and inflationary, with lower classes affected especially ( Zhang et al, 2020 ). Due to instability in oil prices, particularly during the COVID-19 crisis, relying on oil is not a wise strategy and the focus will be on the non-oil sectors of the economy, which could have strongly negative repercussions on the subsistence of many communities.…”

Mixed Methods Study to Explore the Portrait of Micro and Small Enterprises in Semarang City During the Covid-19 Pandemic

“…However, agriculture is slower than in other sectors. [2] Research on the impact of the Covid-19 pandemic on SMEs has also been in Sri Lanka. The study reveals that it requires high economic costs to overcome the effect of the COVID-19 disaster on SMEs in Sri Lanka.…”