Understanding what is needed for economic recovery post-Covid-19

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Governments and emergency services are concentrating on urgent needs as the coronavirus (COVID-19) epidemic continues: increasing hospital capacity, combating hunger, and safeguarding businesses and families from bankruptcy and eviction. The vast majority of funds received thus far from the IMF, the World Bank, other regional banks, or central banks have been used to provide funds for protective equipment at hospitals, to stabilize banking institutions, to pay companies to offer goods and services to essential workers, or to provide direct cash assistance to households.

Governments' decisions to revive their economic engines, especially the long-term economic, social, and environmental benefits they want to accomplish through stimulus measures, will considerably impact their ability to rebuild stronger and better.

It addresses two timescales: the immediate need to create as many jobs, money, and economic demand as feasible, as well as the longer-term necessity to ensure long-term growth and prosperity.

There are three important points to consider in the short term:

Job creation

The amount of jobs produced per dollar invested, the sorts of employment created and who profits from them, and the match between the skills required and those available in the local labor are all factors to consider.

Increased economic activity

Considering the economic multiplier that each intervention may provide, as well as a project's potential to immediately replace missing demand and its influence on import levels and the overall trade balance.

Risk and timeliness

Assessing if the initiative creates stimulation and employment advantages in the short term and if they are long-term, even if local quarantine restrictions are re-imposed.

A strategy must also benefit countries on three distinct dimensions over the long term:

Potential for long-term growth

Some initiatives, for example, do a better job of boosting human capital by developing future skills and improving public health, especially if water and air pollution can be minimized or access to cleaner drinking water can be enhanced. Others may encourage the adoption of more efficient technology, provide essential public amenities such as modern electricity or sanitation, or remedy market flaws such as restrictive subsidies that impede long-term progress.

Future shock resistance

With actions to help society and the economy recover from economic shocks, such as COVID-19 today, and other natural catastrophes and future climate change consequences.

Decarbonization

With initiatives to promote and spread green technology, such as grid investments that make renewable energy and electric cars more accessible, or low-tech solutions like landscape and watershed rehabilitation and afforestation. It will be critical to ensure that stimulus-related investments do not impose a substantial stranded asset burden on the economy in the future decades, such as betting on failing technology or locating investments in high-risk flood zones.

Providing Policymakers with Direction for the Recovery

For starters, it may be used as a rapid "yes-no-maybe" assessment to pinpoint the "worst offenders." The idea is to guarantee that governments do not invest in appealing initiatives because of their stimulative qualities but are harmful in the long run.

In a second phase, the suggested indicators may be used to help decision-makers choose among any surviving projects, finding "best in class" projects that benefit society in various ways.

Authorities have a lot on their plates right now and attempts to solve the present health crisis cannot be prioritized over economic recovery measures. However, when governments move their emphasis to recovery, countries' decisions will determine how tomorrow will unfold and whether we will be better prepared to deal with future global crises.

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