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International Monetary Fund. Asia and Pacific Dept

Abstract

The COVID-19 pandemic plunged the world into a sharp recession in the first half of 2020. Service sector activity, which relies on person-to-person contact, took a big hit. Manufacturing also weakened substantially, and global trade plummeted. Global growth is projected at –4.4 percent in 2020, 0.6 percentage points above the June 2020 World Economic Outlook Update forecast. The upgrade reflects a better second quarter outturn in major countries that eased lockdowns earlier than expected. The recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.2 percent, 0.3 percentage point lower than projected in June 2020, reflecting the persistence of social distancing into 2021.

International Monetary Fund. Asia and Pacific Dept

Abstract

This chapter uses new data and novel modeling techniques to examine the effect of containment and policy measures in affecting the health and economic consequences of the COVID-19 pandemic.

International Monetary Fund. Asia and Pacific Dept

Abstract

This chapter shows, based on high-frequency labor surveys, that inequality is increasing further during the COVID-19 pandemic because job losses have been concentrated among low-income workers. Moreover, the experience from past pandemics suggests that the adverse distributional effects could be even larger in the medium term—including, looking ahead, through the displacement of low-skilled workers by robots—and that the resulting higher levels of inequality could undermine social cohesion. This is especially salient for countries with already high inequality going into this crisis. Information from the IMF Policy Tracker shows that many Asian governments have implemented significant fiscal policy measures to mitigate the pandemic’s effect on the most vulnerable, with the impact depending on the initial coverage of safety nets, fiscal space, and degree of informality and digitalization. Although there is no one-size-fits-all solution, the model-based analysis shows that policies targeted to where needs are greatest are effective in mitigating adverse distributional consequences and underpinning overall economic activity and virus containment.

Bourn-Jong Choe

For the latest thinking about the international financial system, monetary policy, economic development, poverty reduction, and other critical issues, subscribe to Finance & Development (F&D). This lively quarterly magazine brings you in-depth analyses of these and other subjects by the IMF’s own staff as well as by prominent international experts. Articles are written for lay readers who want to enrich their understanding of the workings of the global economy and the policies and activities of the IMF.

NORMAN LOAYZA, HUMBERTO LOPEZ, and ANGEL UBIDE

This paper analyzes common economic patterns across countries and economic sectors in Latin America, East Asia, and Europe for the period 1970-94 by means of an error-components model that decomposes real value-added growth in each country into common international effects, sector-specific effects, and country-specific effects. We find significant comovements in the European and East Asian samples. In the Latin American sample, however, we find country-specific components to be more important than common patterns. These results are robust to different sub-sample time spans and different sub-sample country groups.

Harry C. Broadman

For the latest thinking about the international financial system, monetary policy, economic development, poverty reduction, and other critical issues, subscribe to Finance & Development (F&D). This lively quarterly magazine brings you in-depth analyses of these and other subjects by the IMF’s own staff as well as by prominent international experts. Articles are written for lay readers who want to enrich their understanding of the workings of the global economy and the policies and activities of the IMF.