The World Bank on Tuesday urged countries to go for comprehensive policies to boost long-term growth along with short term measures to address health emergencies and secure core public services in the wake of the coronavirus crisis, amid indications that 60 million people could be pushed into extreme poverty in 2020.
The scope and speed with which the COVID-19 pandemic and economic shutdowns have devastated the poor around the world are unprecedented in modern times, World Bank Group President said.
The Global Economic Prospects (GEP) report released notes that the coronavirus pandemic and the economic shutdowns are dealing a severe blow to the global economy, especially poorer countries, the report said developing nations and the international community can take steps now to speed up recovery after the worst of the health crisis has passed and blunt long-term adverse effects.
Policy choices made today – including greater debt transparency to invite new investment, faster advances in digital connectivity, and a major expansion of cash safety nets for the poor – will help limit the damage and build a stronger recovery.
Financing and building of productive infrastructure are among the hardest-to-solve development challenges in the post-pandemic recovery. There is need to see measures to speed litigation and the resolution of bankruptcies and reform the costly subsidies, monopolies and protected state-owned enterprises that have slowed development.
Short-term response measures to address the health emergency and secure core public services will need to be accompanied by comprehensive policies to boost long-term growth, including by improving governance and business environments, and expanding and improving the results of investment in education and public health, the World Bank report said.
To make future economies more resilient, many countries will need systems that can build and retain more human and physical capital during the recovery – using policies that reflect and encourage the post-pandemic need for new types of jobs, businesses and governance systems, it said.
According to the report, in the long-term, the pandemic will leave lasting damage through multiple channels, including lower investment; erosion of physical and human capital due to closure of businesses and loss of schooling and jobs; and a retreat from global trade and supply linkages.
These effects will lower potential output – the output an economy can sustain at full employment and capacity – and labor productivity well into the future. Pre-existing vulnerabilities, fading demographic dividends, and structural bottlenecks will amplify the long-term damage of deep recessions associated with the pandemic, it said.
During the recovery period, countries will need to calibrate the winding down of public support and should be targeting broader development challenges. The Bank analysis discusses the importance of allowing an orderly allocation of new capital toward sectors that are productive in the new post-pandemic structures that emerge.
To succeed in this, countries will need reforms that allow capital and labour to adjust relatively fast – by speeding the resolution of disputes, reducing regulatory barriers, and reforming the costly subsidies, monopolies and protected state-owned enterprises that have slowed development, the report said.