Four areas to focus on for post-Covid economic recovery

Although Covid-19 is still widespread around the world, countries are expected to experience a strong economic recovery soon. Illustration: Biplob Chakroborty

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Although Covid-19 is still widespread around the world, countries are expected to experience a strong economic recovery soon. Illustration: Biplob Chakroborty

As more than seven billion doses of Covid-19 vaccines have been administered worldwide, although nearly 70% in developed countries and only 2% in low-income countries, the global economy is expected to experience a strong recovery in 2021. Growth projections by international organizations point to a glimmer of hope, with some of the main economic parameters showing positive signs. For example, the International Monetary Fund (IMF) predicted in October 2021 that the world economy would grow by 5.9% in 2021 and 4.9% in 2022, against negative (-) growth of 3.1% in 2020. The World Bank in June 2021 estimated that the world economy would grow by 5.6% in 2021. The United Nations Conference on Trade and Development (UNCTAD) in October 2021 saw world production increase by 5 , 3% in 2021, against a negative (-) 3.5% growth rate in 2020. Of course, the uncertainty cannot be ruled out since we are still grappling with the pandemic, and its forms and its spread are beyond the control of human control. Such prospects are therefore subject to the level of pandemic risks and the management of the financial situations of developing countries, which are more in difficulty than developed countries. It is also expected that the return to the pre-pandemic economic situation will take several years.

In addition, this growth will be uneven across regions and countries, and across sectors of the economy. There will also be unbalanced growth within the countries themselves. This is already happening, as large companies have managed to recover to some extent and are showing promising signs of growth, while smaller ones are struggling. Therefore, some international organizations and experts have indicated that the recovery from the pandemic will be K-shaped. In fact, the unbalanced growth model already existed during the pre-Covid period. While developed countries progressed smoothly and significantly, developing and least developed countries continued to fall behind with limited funding, low technology uptake and low capacity. At the same time, as the rich accumulated income and wealth, the gap between rich and poor also widens at the country level. Therefore, while the attempt at economic recovery is underway, the world is expected to perform better in terms of economic growth, which will be inclusive and equitable. There has been a lot of rhetoric about building a resilient global economy. But what would it really take to recover from the economic contraction caused by the pandemic? We want to recover the losses and restore the growth momentum. But the pattern, type and nature of this growth is expected to be different from the pre-pandemic period, and to be new and incremental. I would like to focus on four areas for such a recovery. These should in fact be the prerequisites for post-Covid growth narratives in all countries, especially those with limited resources.

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First, the health system must be made robust through significant investments in physical and intangible health infrastructure. We must remember that we are not yet in the post-Covid phase. The pandemic is very widespread; there is enormous uncertainty as to when it will leave us, or if it will go away at all. Of course, the majority of the population in developed countries is vaccinated and is probably in less risky situations. But people in developing countries and poor countries are still in danger of a pandemic. Thus, the immediate requirement is to ensure immunization for all in the countries left behind. All eligible citizens of all countries must be fully immunized and overcome the virus. This requires political commitments and actions at the global level, so that vaccines are accessible to people in poor countries.

At the national level, the respective governments should also take appropriate policy measures to develop robust and efficient health systems capable of handling critical health crises, such as the pandemic. Such a health system must also be affordable for all citizens, so that they can pay for doctors, nurses and medicines. Greater investments are needed, not only for more hospitals, intensive care units, doctors, nurses and health service providers, but also for universal health insurance, so that health services health care are affordable to ordinary citizens. This not only applies to Bangladesh, but also to many developing countries.

Second, many governments will need to maintain an accommodative monetary policy to support businesses for some time. During the pandemic, expansionary monetary policies were needed as governments around the world announced stimulus packages at different scales to support businesses and individuals. In Bangladesh, such support has helped many businesses and poor people stay afloat. With the resumption of economic activities and increased consumer demand, businesses, especially the larger ones, have managed to make a comeback. However, small and medium-sized enterprises (SMMEs) faced the most difficult challenge, as they had little access to finance despite the stimulus packages put in place. Due to the informal nature of CMSMEs, complicated formalities for bank loans, and lack of information on stimulus packages, many suffered heavy losses and closed. These small businesses are sources of employment for many. As the economy strives for higher growth, these businesses will need liquidity support in the form of soft loans from commercial banks. In addition, there is also a need for direct cash assistance for the poor who could not receive cash during the first phase of cash assistance. Although the economy has started to prepare, the high inflationary pressure of raw materials has become a concern for ordinary people, including the poor who are hit the hardest.

Third, more investment should be made in green projects to make future growth environmentally sustainable. Investments are essential for job creation. But it is essential to monitor how these investments are made. Investments in infrastructure by destroying forests, biodiversity and ecosystems, and burning fossil fuels can increase the country’s gross domestic product (GDP) and create jobs, but growth is poor and unsustainable. To fulfill Bangladesh’s commitment to reduce greenhouse gas (GHG) emissions and adapt to climate-induced risks and disasters, technology is crucial. The private sector, which plays a key role in the economy through investment and job creation, should take the lead in introducing clean technologies for green growth. Technology must also be associated with the development of the capacities of the population. For adaptation, public investment plays an essential role. However, developing countries do not have sufficient resources to undertake adaptation measures, which is costly. It has to come from developed countries as well as the Global Climate Fund. Indeed, developed countries are also responsible for the transfer of technology to poor countries.

Fourth, post-Covid growth should be aimed at increased participation of women in the labor market. In 2020, the participation of women in the labor market was 36.3%, according to the Bangladesh Bureau of Statistics (2018). However, 91.8 percent of the female workforce is in the informal sector and earns low incomes with high job insecurity. In any economic shock, workers in the informal sector are the first to lose their jobs. Reports have also revealed that women have been more vulnerable to domestic violence during the pandemic. While devising measures to ‘build better ahead’ in the post-pandemic period, emphasis should be placed on policies favorable to women, so that they can participate in greater numbers in the labor market. Implementing the policies will require greater investments in the education and training of girls and the creation of a safe environment for them.

Overall, future growth should focus on quality rather than quantity. Aspects of inclusiveness and sustainability must be brought to the fore. Therefore, policies and prospects for economic growth need to be changed.

Dr Fahmida Khatun is Executive Director of the Center for Policy Dialogue (CPD).

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