The New Normal: Counting the Economic Toll of Coronavirus on Cities

October 2020

The Coronavirus (COVID-19) pandemic has slowed down economic growth and has triggered significant interruption to urban economic growth, raising unemployment, reducing consumer spending and cutting local government finances. Cities are the engines of economic growth, with the world’s 1,219 cities generating 60% of global GDP in 2019; however, they have been the major sources of COVID-19 infections. The report examines the scale of economic disruption in cities caused by COVID-19.

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This report comes in PPT.

Key Findings

90% of cities to see an economic contraction in 2020

90% of cities will see real GDP decline in 2020. The pandemic is unlike any economic crisis, and much more acute the financial crisis of 2008-2009.

Tourism, real estate, transport, retail and leisure, and the public sector have been most impacted by the COVID-19 pandemic

Numerous urban industries have been impacted by the COVID-19 pandemic, including tourism, real estate, transport, retail and leisure, and the public sector. For example the tourism industry is not due to recover any time soon, as the threat of successive COVID-19 waves will require the continuation of social distancing and quarantine measures. This will suppress the tourism and travel industry in major hotspot cities, such as London, Paris and Bangkok.

Developing cities to see a quicker recovery from COVID-19

Developing cities are forecast to come out of the economic slump caused by the COVID-19 pandemic faster than developed cities. This is especially the case with Chinese cities, which are among the few cities in 2020 that are set to record economic growth, while most others face economic contraction.

Income distribution will change depending on the severity of the COVID-19 pandemic

The COVID-19 pandemic could have only a mild impact on economies, but it also has the power to cause large-scale economic havoc. For example, in the worst case scenario, London could lose 10% of its largest household segment – households with disposable incomes of USD45,000-150,000 – in 2020 compared to 2019.

Municipalities face pressure but need to put effort into helping local businesses

Given the reduction in business activity, most city municipalities will see their budgets cut, due to lower tax revenues. However, while tough times are ahead, municipal authorities need to boost their local economies by providing tax breaks and financial assistance to businesses. This may prevent or at least mitigate the impact of a laissez faire approach, which would result in excessive unemployment levels.

Key findings
90% of cities to see an economic contraction in 2020
Developing cities to see faster return to growth
Urban economic contraction will have large impact on global growth
Key urban sectors and industries impacted by COVID-19
Tourism: airport industry to be hit hard by dropping visitor numbers
Amsterdam keen to focus on liveability and sustainable tourism
Retail:consumption-based cities are more exposed to falling spending
Brisbane airport turns to online retailing
Transport: consumers are swapping mass for solo mobility
COVID-19 and improving infrastructure prompts more cycling in cities
Municipalities face budget cuts
London faces nearly USD650 million hole in its budget due to coronavirus
Vilnius municipality stepping in to aid citizens and local businesses
Sydney: providing grants to small businesses amid COVID-19 crisis
Montreal: local government providing support to cultural enterprises
Real estate sector may see a slump in some cities
New York’s Manhattan records over 13,000 vacant apartments
Vilnius’s house prices continue surging amid the pandemic
Euromonitor presents three scenarios probing COVID-19’s impact
New York: GDP per capita poised to return to pre-COVID levels in 2023
New York: C segment to see the biggest change in growth from baseline
London: GDP per capita in 2024 will remain below 2019 levels
London: large rise in poorer households under a Pessimistic 1 scenario
Paris: hotels and catering to see a 15 percentage point growth change
Paris: D segment to see an 8% surge in a Pessimistic 1 scenario
Tokyo: city to record much slower growth in education spending
Tokyo: L-shaped recovery, with COVID-19 suppressing income growth
Sydney: disposable income to return to pre-COVID-19 levels in 2022
Sydney: all scenarios show minimal change to income distributions
Beijing: the economy advances despite slight economic slowdown
Beijing: city to continue seeing rapid surge in high-income households
Moscow: GDP per capita to return to pre-COVID 19 levels in 2024
Moscow: worst case scenario could see segment C lose 360k households
São Paulo: economy to recover after slow growth in the last five years
São Paulo: could lose 1/5 of all Segment C households in Pessimistic 3
Delhi: inhabitants to see a 20% rise in average wealth
Delhi: COVID-19 just a short-term blip, as middle class gains strength
Johannesburg: income growth to foster positive economic changes
Johannesburg: will avoid major dip in household income growth
Business takeaways
Focus should be on how to get cities pandemic proof


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