The economic impact of Covid-19 pandemic in Sardinia

The spread of Covid-19 has forced national governments to introduce restriction measures needed to limit contagion among people. Once implemented, such interventions inevitably created a brake on the production system which resulted in a decrease of aggregate demand. The impact on the economic system of the Covid-19 restrictions has been of the direct, indirect and induced type, mainly affected by the interconnections amongst production activities as well as largely correlated to the structure of income distribution of the respective institutional sectors. Of significant importance is also the impact of the underlying restrictions in terms of mobility imposed on citizens by national government which has caused the major negative impacts on that territories where tourism activities are key for the local economy. Along with these disaggregated impacts, there were also negative effects for tour operators, agencies linked with tourist industry, as a kind of knock-on effects that has affected the transport services to a high degree given their importance for islands regions, such as Sardinia. In this paper an effort is made to quantify the economic regional effects for the Sardinia region caused by the restriction rules established by Prime Ministerial Decree of 22 March 2020. The analysis put forward is undertaken via an application of a Social Accounting Matrix (SAM) built specifically for the Sardinia economy to a Computational General Equilibrium (CGE) model which is appropriately regionalized in order to describe and recreate the Sardinia regional economy. The results obtained indicate that the stronger the interdependency between the various activities which characterize the structure of the Sardinia economy, such as tourism and transport, the more adverse and widespread are the effects which are observed as a whole a result of the imposed lockdown. The analysis demonstrates the importance of multisectoral analysis in assessing the impact of such shocks as it allows for the full mapping of the resulting effects across the various activities and institutions. Such an analysis is needed in order for policy makers to effectively design a recovery policy aimed at overcoming the challenges of a regional economic recession.