New report estimates effect of pandemic on Rhode Island economy

Published on Monday, August 23, 2021

PROVIDENCE, R.I. – A report released today by the Rhode Island Department of Revenue, Office of Revenue Analysis (ORA) confirms that the effect of the COVID-19 pandemic diverged in 2020 for business sectors across Rhode Island, producing a "K-shaped" recovery as the year progressed.

The Office of Revenue Analysis commissioned Chainbridge Software LLC, of Fairfax, Va. (Chainbridge) to estimate the effect of the COVID-19 pandemic on Rhode Island's economy in 2020. The report used Rhode Island sales tax data for the analysis, which provided the best measure of the direct impact of the pandemic on the state's economy. The report looked at the impact of the COVID-19 pandemic by sector relative to an estimated pre-COVID-19 pandemic baseline. This approach allowed Chainbridge to better capture the effect of the pandemic on the state's economy.

Office of Revenue Analysis Chief Paul L. Dion, Ph.D., said: "I would characterize the report as confirmation of what we suspected was the impact of the pandemic on Rhode Island's economy but providing us with a level of detail that we lacked."

Dion added: "I think there are two important pieces to this. First, targeting economic recovery initiatives to those sectors most negatively impacted by the pandemic with the understanding that it is highly unlikely that we can restore the economy to what it was before the pandemic. Second, determining what is to be done with and for the workers displaced by the changed economy as a result of the pandemic."

Among the reports, key findings: • Effectively, Rhode Island's economy as measured by taxable sales and categorized by economic sectors in the report, experienced a "K-shaped" recovery from the COVID-19 pandemic with sectors represented by the leg of the "K" still down from pre-COVID-19 baseline projections while sectors represented by the arm of the "K" at or above the pre-COVID-19 baseline projections. • The Retail sector, particularly the Hardware subsector that includes building materials and garden equipment, proved to be the best-performing portion of the state's economy.

Other findings include: 1. The state's experience with the COVID-19 pandemic was characterized by four phases: (i) initial onset of coronavirus and shut down; (ii) retrenchment of coronavirus and reopening; (iii) resurgence of coronavirus and pause; and (iv) introduction of coronavirus vaccines and returning to normal. 2. The Retail Trade sector (broadly defined) weathered the COVID-19 Pandemic much better than the Services sector. 3. The best performing Retail Trade sector was Hardware, comprised of building material and garden equipment and supplies dealers, which never experienced a decline in taxable sales relative to its estimated pre-COVID-19 baseline in 2020. 4. The worst-performing Services sector was Accommodation, comprised of hotels and lodging, which saw a significant drop in taxable sales in phase 1 of the COVID-19 pandemic with some recovery in the later phases. The sector never attained its estimated pre-COVID-19 baseline projections.

Estimated 2020 Impact of the COVID-19 Pandemic on RI Economy (August 2021)