Juan Pablo Cuesta Aguirre and Mrs. Swarnali A Hannan
To shed light on the possible scarring effects from Covid-19, this paper studies the economic effects of five past pandemics using local projections on a sample of fifty-five countries over 1990-2019. The findings reveal that pandemics have detrimental medium-term effects on output, unemployment, poverty, and inequality. However, policies can go a long way toward alleviating suffering and fostering an inclusive recovery. The adverse output effects are limited for countries that provided relatively greater fiscal support. The increases in unemployment, poverty, and inequality are likewise lower for countries with relatively greater fiscal support and relatively stronger initial conditions (as defined by higher formality, family benefits, and health spending per capita).
International Monetary Fund. Middle East and Central Asia Dept.
A year into the coronavirus (COVID-19) pandemic, the race between vaccine and virus entered a new phase in the Middle East and Central Asia, and the path to recovery in 2021 is expected to be long and divergent. The outlook will vary significantly across countries, depending on the pandemic’s path, vaccine rollouts, underlying fragilities, exposure to tourism and contact-intensive sectors, and policy space and actions. 2021 will be the year of policies that continue saving lives and livelihoods and promote recovery, while balancing the need for debt sustainability and financial resilience. At the same time, policymakers must not lose sight of the transformational challenges to build forward better and accelerate the creation of more inclusive, resilient, sustainable, and green economies. Regional and international cooperation will be key complements to strong domestic policies.
The global coronavirus outbreak is a crisis like no other and poses daunting challenges for policymakers in
many emerging market and developing economies (EMDEs), especially where the pandemic encounters
weak public health systems, capacity constraints, and limited policy space to mitigate the outbreak’s
repercussions. A severe economic impact in the first half of 2020 is inevitable. Medium-term projections are
clouded by uncertainty regarding the pandemic’s magnitude and speed of propagation, as well as the
longer-term impact of measures to contain the outbreak, such as travel bans and social distancing. However,
most EMDEs are already suffering from disruptions to global value chains, lower foreign direct investment,
capital outflows, tighter financing conditions, lower tourism and remittances receipts, and price pressures for
some critical imports such as foods and medicines. Commodity exporters have to absorb, in addition,
a sharp decline in export prices, notably for oil. Further, in most countries, the coronavirus outbreak is
producing unanticipated health spending needs and revenue losses as activity slows. Coping with these
challenges is especially difficult for countries with limited administrative capacity, tight external financing
constraints and/or already high debt levels, and thus requires substantial support from the international