The growth trajectory of the global economy has been reversed by the Covid-19 pandemic. While the world prepared for a tough time, actual numbers were awaited at all quarters. Putting all speculations to rest, OECD released its Economic Outlook, Interim Report September 2020.
Predicting the exact extent of damage, the report projected global GDP decline by 4.5% compared to 2019. Acknowledging the global efforts, the report highlighted that after the devastating first six months of 2020, economic productivity recovered speedily as businesses reopened. Authorities acted rapidly and announced massive aids and policy level interventions to boost businesses and cushion the blow to jobs and incomes.
But gradually in the months after summer, the pace of recovery slackened. Hence, while the global economic outlook is less pessimistic, risks and uncertainty are at an all-time high. Emphasizing the need to accept the new normal, the report stated:
“Restoring confidence will be crucial to how successfully economies can recover, and for this we need to learn to safely live with the virus.”
Italy, India, Mexico and UK have emerged as the worst victims of the pandemic and are expected to suffer a decline in GDP by more than 10%. Considering the massive loss of lives experienced by US, the corresponding economic damage is considerably lower with a GDP loss of 3.8%. South Korea is likely to get off very lightly with GDP reduction of just 1%, while China appears to be the only country to register a positive GDP growth of 1.8%.
Building confidence – Key to recovery
Although the virus has not infected majority of the world’s population, it has completely shattered their confidence. Governments and other organizations of stature must take up the task of rebuilding the confidence by impressing upon the masses their ability to tackle any further outbreaks or pandemic waves.
Since economic growth is determined by various factors like consumer sentiment, business confidence and government incentives to boost demand or secure jobs, it is crucial for governments to continue giving policy support and relief packages to accelerate economic recovery.
However, now, the policies need to become appropriately targeted and more flexible to adapt to changing conditions. More importantly, governments and businesses must convince the masses that they are doing everything possible to improve the conditions and create new opportunities for all.
OECD also suggests a few investment imperatives to boost confidence in people:
Invest in health
Building health infrastructure and systems that can adequately respond to the rising health care demands instigated by the virus is very important. When people can see that the patients are adequately care for, the fear will decrease and naturally build confidence. Global cooperation and collaborations must be forged to leverage greater funding and ensure that vaccines and treatments at affordable costs are made available to everyone, everywhere.
Invest in a green recovery
Conscious efforts must be made to accelerate digitization, emphasize job retention and encourage enterprises to invest in sustainable behavior, services and products. Globally national governments must leverage investments in green energy, transport, infrastructure and housing to catalyze low-carbon transition.
Invest in people
Since the most vulnerable population has been hit harshest by the pandemic, measures must be taken to provide social protection to them. Authorities must ensure new opportunities are made available to all through proper education, quality training and upskilling for new roles at work. Targeted support for improving job prospects for the youth and filling up skill-gaps are also extremely important to ensure faster recovery.