The virus is causing economic shock globally soon after triggering a supply shock in China. Though East Asia and the Pacific (EAP) had their macroeconomic policies and financial regulations in place to deal with the normal quivers, they are now witnessing disruptive events. Needless to say, these economic pains are seemingly unavoidable.
Countries must act as soon as possible through urgent healthcare investments and targeted fiscal measures to address the impacts. According to a report, growth in the EAP developing region is to “slow to 2.1% in the baseline and to negative 0.5% (lower case scenario) this year. On the other hand, China is projected to decline to 2.3% in the baseline and 0.1% (lower case scenario) this year.”
Even though, containing this pandemic will lead to a sustainable recovery in the region, the financial market stress is expected to remain high.
Besides, the pandemic will have a huge impact on poverty. It is estimated that only around 24 million people will be able to escape poverty in the region. And if the lower-case scenario prevails longer, then the poverty is likely to increase about by 11 million people.
However, there’s a good news!
The EAP region has its strengths to tap. Just that the countries will need to act fast. The Vice President for EAP, Victoria Kwakwa suggested for investment in the healthcare industry and long-term preparedness.
Targeted Measures
Subsidies for sick pay and healthcare may ensure containment of the pandemic and prevent from any long-term human capital loss. Also, deeper international cooperation is expected to be the most cost-effect way to deal with this threat. The EAP and elsewhere should keep trade open while coordinating with the macroeconomic policy.
Similarly, new cross-border public-private partnership should run the production and supply of the major medical supplies to ensure financial stability. The trade should be opened so that medical and other supplies can be made available to all other counties.
Another measure could be to using credit for smooth household consumption while enabling the firms to get through the immediate shocks.
Sure, there are many poorer countries, carrying a high burden of corporate and household debt. For them debt relief will be helpful, so that the resources can be focussed on maintaining the economic and health impacts.
Additionally, the report highlights the higher risk of falling into poverty among households on sectors that are more susceptible to the pandemic’s impacts; for example, tourism in Thailand and the Pacific Islands, informal labours in almost all countries and manufacturing in Vietnam and Cambodia.
To deal with, the World Bank Group is giving out $14 billion fast-track package to developing countries so as to lessen the time to recovery. Also, the IFC is rolling out $8 billion to help private companies. And for healthcare capacity, IBRD and IDA are giving US$6 billion, initially.
With countries requiring broader support, $160 billion will be deployed up to 15 months by the World Bank Group to protect the poor, support businesses, and fasten financial recovery.
