NCR, Mumbai stare at up to $1.7bn per week loss due to shutdown: Barclays

The National Capital Region (NCR) and Mumbai – the two ‘megacities’ – according to a recent Barclay’s research, will be the two most impacted in India due to the 21-day lockdown, followed by Bengaluru, Hyderabad and Pune.

The report co-authored by Rahul Bajoria, chief economist at Barclays has studied the Asia – Pacific (Asia-Pac) regions currently under lockdown and pegs the economic loss impact in these regions between $1 billion to $1.7 billion per week.

“We find that the absolute economic loss is likely be the largest from the shutdown of Kuala Lumpur, Manila, Delhi (NCR) and Mumbai, ranging from $1 billion - $1.7 billion per week. However, in percentage of GDP terms, we find that lockdowns in Kuala Lumpur (Malaysia), Bangkok (Thailand) and Manila (Philippines) pose the biggest downside risk,” the Bajoria co-authored report says.

A megacity is typically defined as a city or an urban cluster which has more than 10 million population. However, given the nature of the Asia Pacific’s small, open economies, Barclays loosened the definition for this project to include the biggest economic hubs or key metropolitan cities / regions where the gross domestic product (GDP) data was available with relative ease. For NCR, Barclays has included Delhi and satellite towns of Noida, Gurugram and Ghaziabad.

So far, within Asia, cities such as Mumbai, Delhi, Manila and Kuala Lumpur are under full lockdown, while Bangkok, Sydney, Melbourne, Jakarta and Singapore are deemed to be under partial lockdown. The only megacity in the region where activity is close to ‘normal’ is Taipei, but has not been covered in the study given the lack of city-level data.

While the cities under a severe state of lockdown are experiencing a greater amount of absolute economic loss right now, Barclays believes if the lockdown becomes uniformly severe in other cities, the economic costs for small open economies, where megacities tend to dominate activity, will rise rapidly.

“The difference in the level of lockdown will drive material growth divergence across Asia-Pacific. Indeed, as a percentage share of their own respective GDP, we find that at the current juncture, the economic loss is the highest in Kuala Lumpur, followed by Mumbai, Delhi and Manila, reflecting the stringent nature of their lockdowns,” Barclays believes.

In most economies, Bajoria says, the loss of output is largely non-tradable, and hence is unlikely to be recovered even when activity levels normalise. That is in contrast to manufacturing-sector dominated cities such as Gyeonggi in Korea, Pune in India, and the rest of Luzon.

"If the clampdown in other cities with moderate levels of activity disruption were to rise, the economic losses in cities such as Sydney, Melbourne, Seoul, Jakarta and Singapore will rise as well. As such, while currently these cities have had limited loss of output, their downside is greater from here on, unless they find a way to control the spread of the disease," Barclays said.