Economic Recovery Requires Global Efforts

Muhamad Basri, Lili Yan Ing and Günther Schulze

Chapter 2 in New Normal, New Technologies, New Financing, pp 8-21 from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: The coronavirus disease (COVID-19) is a wake-up call for the world. From its emergence in December 2019 to mid-February 2022, almost 500 million COVID-19 cases and 5.8 million deaths worldwide had been confirmed. The pandemic and prolonged uncertainties have increased unemployment, poverty, and inequality. The worldwide unemployment rate has risen from 5.43% to 6.37%, disproportionately affecting lower middle-income countries, women, youth, and less educated groups of the population (ILO, 2021). The pandemic is estimated to have pushed about half a billion people or 8% of the world’s population into poverty (Summer, Joy, and Ortiz-Juarez, 2020), including 88 –115 million who have been sent into extreme poverty (World Bank, 2021). COVID-19 exacerbates pre-existing inequalities, as the poverty impacts of the pandemic have been distributed very unequally. This will be amplified in the near future due to food price inflation and pandemic-related disruptions to education, which disproportionately affect the poor. COVID-19 is also expected to create long-term impacts (scarring effects) on human capital and productivity due to learning losses. Increased unemployment and poverty may persist in the long term as it will be very difficult to reintegrate currently unemployed people in the labour market since their skills will have become obsolete and they will be crowded out by fresh graduates (Ing and Basri, 2022). To mitigate the effects of the pandemic, governments around the world have launched major fiscal and monetary stimulus measures. Yet, individual country efforts will be nothing without global coordination, ommitments, and enforcement. Moreover, the war in Ukraine will have major economic repercussions worldwide that will aggravate the post-pandemic recovery. Section 2 describes government interventions in the health sector, as well as fiscal and monetary stimuli. Section 3 presents fiscal and monetary stimulus exit strategy scenarios. Section 4 draws policy recommendations.

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