Global Economy

World Bank exhorts nations to focus on wealth, after health

New Delhi: Countries should take steps to speed up the recovery process as they overcome the Covid-19 health crisis, the World Bank said in its Global Economic Prospects report, which was partly released on Tuesday.

Apart from short-term measures to address the health emergency and core public services, the multilateral development bank advised countries to focus on comprehensive policies that boost long-term growth and improve governance and business environment.

“The scope and speed with which the Covid-19 pandemic and economic shutdowns have devastated the poor are unprecedented in modern times,” said World Bank group president David Malpass. “Current estimates show that 60 million people could be pushed into extreme poverty in 2020.”

The report called for targeted stimulus measures since economic resilience of many countries will depend on their ability to build and retain more human and physical capital during the recovery.

India is opening up after a lockdown of about two months. The government has announced a ₹20 lakh crore package to counter the economic impact of the coronavirus outbreak and the lockdown. Analysts have said more is needed to get the economy back on track.

The latest World Bank report highlights the importance of allocating new capital toward sectors that are productive in new post-pandemic structures. “To succeed in this, countries will need reforms that allow capital and labor to adjust relatively fast—by speeding the resolution of disputes, reducing regulatory barriers, and reforming the costly subsidies, monopolies and protected state-owned enterprises that have slowed development,” Malpass said in his foreword to the report.

According to the bank, the pandemic will have a lasting damage on economies through lower investment, erosion of physical and human capital, and a retreat from global trade and supply linkages.

“When the pandemic struck, many emerging and developing economies were already vulnerable due to record-high debt levels and much weaker growth,” said Ceyla Pazarbasioglu, group vice president for equitable growth, finance and institutions at the World Bank, emphasising the impact on emerging economies.

In its South Asia Economic Focus report in April, the World Bank had projected India’s growth at 1.5-2.8% in FY21 and projected the fiscal deficit to widen to 9% of GDP.

“During the mitigation period, countries should focus on sustaining economic activity with targeted support to provide liquidity to households, firms and government essential services.”


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