COVID-19 has introduced great economic challenges for the countries around the world. The beginning of the pandemic was characterized by deep uncertainty and governments that decided to lockdown cities to reduce the risk of infection. Countries now have more epidemiological and economic available data and, therefore, are trying to manage progressive economic reactivation.
According to the International Monetary Fund (IMF), due to various factors, there was an economic shock when the pandemic was declared. First, lockdown and social distancing forced to fully close certain sectors (such as tourism, hotels, entertainment). Other sectors temporarily closed, but disrupted supply chains and global productivity decreased. In addition, fear of being infected, salary decrease and layoffs, led to less consumption, which resulted in more layoffs and closing businesses. Furthermore, health expenses increased more than planned.
In that sense, IMF said in its report World Economic Outlook of April 2020, that one of the priorities that countries should have is securing resources for the healthcare system. This means to increase the number of COVID-19 tests, hiring healthcare professionals, purchasing equipment, and expanding isolation rooms in hospitals.
Measures to protect citizens
For socialprotection.org, a platform that evaluates social protection policies worldwide, during COVID-19, economic measures seeking to protect citizens have increased substantially. Globally, there are 195 territories that have planned or introduced specific economic measures in response to coronavirus.
An example of these measures is social assistance and social security. The first is a cash transfer for people who lost their jobs or income due to the pandemic, and the second is financial aid to pay for medical expenses. The platform explains in its monthly report that 63 programs in 47 countries have adapted their administrative systems for people’s easy access to this assistance. Likewise, 54 countries have increased the level of monetary transfers to citizens and 167 countries have increased aid coverage in their territories.
And Latin America?
In its April 2020 study “La economía latinoamericana en los tiempos de COVID-19”, the World Bank explains that the region does not have the fiscal space to face the crisis, in addition to the economic slowdown that began in 2011, especially in Mexico, Brazil and Argentina, the three largest economies. With this panorama, the international organization determined that the pandemic will be more economically devastating in Latin America for two reasons: informal employment and limited resources.
The consequence is reflected in people losing their jobs, limitations in salary increase possibilities and decrease in the approval of new projects. In most cases, each household’s income will be affected in the short and medium term. However, this economic shock will continue depending on several factors, the first being how quickly a vaccine or treatment to cure the coronavirus is found. Another important factor is the mitigation of a second wave of infections, which will allow to resume the normal course of activities.
The World Bank recommends having an adequate political response that directly faces the social dimension of the crisis. The State will be a key player in an economic recovery, but it is important that it act with transparency so as not to lose confidence in the citizens. Finally, to achieve a slow but sound recovery, it is important to have a long-term vision of the economic movements performed to face COVID-19.
The crisis as a lesson
For 2013 Nobel Prize in Economics, Robert J. Shiller, economic lessons that have come out of this crisis are, for example, understanding that a pandemic is real, and the world must be better prepared for an upcoming crisis. Likewise, the importance of having good government systems that respond on time and are ready to face the challenges.
In addition, with COVID-19, people have understood that crises can happen at any time and have learned to plan, save for the long term and keep debt levels low. Humankind has learned to value what they have, because now they are aware that they can lose it at any time.
Although the outlook at the global and Latin American level does not seem encouraging, governments have responded well, and international cooperation has been unprecedented. Teamwork between countries and citizens will be essential to avoid infection and save time, while the pharmaceutical industry creates a vaccine or treatment for COVID-19.
Cinco lecciones del covid-19 a las finanzas personales
Crisis económica por el coronavirus | Robert Shiller, nobel de Economía: “No existe una pandemia, sino dos”
La economía latinoamericana en los tiempos de Covid-19 (Coronavirus)
Recesión por el coronavirus: 5 preguntas para entender qué ocurre cuando la economía de un país decrece (y cómo te puede afectar)
World Economic Outlook, April 2020: The Great Lockdown