Promoting Economic Recovery In Response To COVID-19
Covid-19 has wreaked human and economic havoc around the world. To date, it has affected more than 200 countries, infected over twenty million people, and cost over 800,000 lives. It is estimated that its economic damage has been around $90 trillion.
A recently published Congressional Research Service report on the ‘Global Economic Effects of Covid-19 states: “Estimates so far indicate the virus could trim global economic growth by 3.0% to 6.0% in 2020, with a partial recovery in 2021, assuming there is not a second wave of infections.”
The report warns of heavy human costs in terms of ‘lives lost’, rising levels of poverty, derailed careers and increased social unrest. It projects that global trade could drop by 13% to 32% and especially harm trade-dependent emerging markets and developing countries.
There is no doubt, as some experts title it, that we are living in the ‘Coronavirus Era.’ The lockdowns in countries appear to have had a positive effect in retarding the spread of the virus. As countries such as the U.S., Brazil, and India have reopened, however, the spread has accelerated again.
This indicates that there needs to be a delicate balance between ending lockdowns and reopening and maintaining the practices such as mask wearing, social distancing and handwashing that inhibit the spread. As the BBC reports, Dr. Margaret Harris of the World Health Organization says, “”Leaving lockdown does not mean back to the old ways. It’s a “new normal”.
Given this new normal, what needs to done to promote economic recovery in response to the disastrous conditions that have been created by Covid-19?
In my opinion, as an international philanthropist with some expertise in economic development, the proper way to start is with the understanding that a recovery will not be simple, short or a straight line. With that in mind, I believe there are three fundamental requirements for facilitating an economic recovery:
Defeat Covid-19 and Eliminate the Health Crisis – The U.S. Federal Open Market Committee (FOMC) in a policy statement says, “The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. The FOMC’s policy statement doesn’t say it but virtually all medical and health care expert agree that defeating Covid -19 and eliminating the health crisis is pinned on having a vaccine that prevents the virus.
The major obstruction to economic recovery will not be removed until there is a vaccine that has been clinically trialed and demonstrated to be successful in treating patients and then administered to a broad swath of a nation’s citizenry.
Institute a New Era of Human Development – The pandemic has given rise to a new era of human development. A work from home culture, online trade, fields of cyber security, Artificial Intelligence and other related areas have ballooned. This demands the development of new skill sets in a country’s workforce. Countries that want to keep themselves and their citizens on the cutting edge must create human capital training, education and development programs to address those needs.
Revive Stimulus Packages for the Unemployed and Small Businesses – After the breakout of the pandemic, many nations established stimulus packages with an emphasis on the unemployed and small businesses. Most of these packages have now expired but the need remains great. These packages should be revived because they will boost the economy from both sides: spending and trading.
Those are general actions that should be taken at the country level. What should the developed world do to assist developing countries – especially the least developed ones in Africa and Asia?
Mohamed A. El-Erian, Chairman of US President Barack Obama’s Global Development Council and a seasoned economist, recommends global cooperation for the economic recovery. In an article he wrote El-Erian states, “The COVID-19 pandemic threatens to devastate large parts of the developing world. Only with a concerted, cooperative, and holistic approach can the international community avoid a large-scale humanitarian tragedy – and protect the rest of the world from destabilizing blowback.”
I agree with that perspective. What the developed world can do is come together to outline and implement a Marshall Plan which includes stimulus packages and sustainable economy programs. I suggest the following things to consider for a Marshall Plan:
- Charting a mechanism for smooth flow of trade across the globe with special incentives for exports from developing countries
- Expanding funding assistance, relief in debt, establishing an international fund – jointly by developed countries and giant companies earning during pandemic.
- Developing a trustworthy and advanced healthcare system and sharing best practices to effectively face such pandemics.
China is already engaged in large scale in-kind medical donation, financial assistance and infrastructural reforms to several nations. The United States, European countries, and ally states should unite to do the same.
Taking all of this into account, where does Pakistan stand economically because of Covid-19 and what can and should Pakistan do now?
Khurram Schehzad, an investment banker and risk analyst expect says, “Pakistan’s economy to shrink by $15 billion as a result of the pandemic”. He also predicts a 10% decline in gross domestic product (GDP) in the fourth quarter of the financial year 2020. As with all the nations of the world, the economic impact of Covid-19 has been devastating.
Pakistan is already running Resilient Institutions for Sustainable Economy (RISE) program to bolster Covid-19 economic recovery and fiscal resilience with the World Bank’s assistance. Along with this program, other efforts to be considered should be accelerating macroeconomic stability through tax base broadening, debt management and transparency, and reforms to achieve financial viability in the power sector.
Pakistan also has a huge potential to take advantage of booming software industry, tech startups, cyber security and online trade. In addition, human development in the emerging fields is vital for midterm and long-term economic strengthening of the country as the pandemic has already hit country exports and remittances from overseas Pakistanis.
Last but not least, the government should consider social protection programs for disadvantaged classes and a comprehensive small business support package.
In conclusion, Covid-19 is the enemy of the world. It is an equal opportunity killer and offender. Recognizing this, the nations of the world must embrace and reach out to each other to terminate Covid-19 and make the whole world healthier and economically stronger in the future.