Quantifying economic vulnerability to covid-19 pandemic: A cross-country study

This study is an attempt to quantify the vulnerability of countries to the COVID19 pandemic which is being viewed as a game changer for the global economic order. The criteria for assessing vulnerability of individual countries have been selected on the basis of the role these factors played during past crises as well as their specific role in the current COVID-19 induced economic crisis. Ranking of countries is based on a single vulnerability index constructed on the basis of three distinguishable building blocks: (i) the severity of the shock, (ii) the exposure of a country to these shocks and finally, (iii) a country's ability to resist these shocks or the degree of resilience of a country to these shocks. Apart from assessing the initial conditions, eight broad categories of economic indicators have been selected to measure exposure and resilience to the COVID-19 shock through various channels of transmission. The challenge in selection of indicators is to make the exercise comprehensive enough as to capture both the direct and indirect channels through which the pandemic could hit economic activities. Overall, it is observed that advanced economies (AEs) exhibit lower exposure and higher resilience as compared to the emerging and developing economies within the set of countries selected for this study. Furthermore, as per the stepwise regression analysis, out of 20 indicators considered for the study, share of retail, transport and hospitality; external debt burden; and broadband penetration are found to be most crucial determinants of the extent of output loss during the COVID-19 crisis.