ECONOMIC IMPACTS OF CORONA VIRUS ON DEVELOPING

COUNTRIES

FINAL REQUIREMENT FOR

ECONOMICS

MR. GLEN FERDINAND MAGADIA

INSTRUCTOR
Batangas State University

Submitted:
KYLA MAE N. CASTILLO
Batangas State University
 PART I
EXECUTIVE SUMMARY

The coronavirus disease (COVID-19) has critically impacted global health systems and
economies, especially in developing countries. Those countries have been struggling to
address the preexisting burden of diseases with limited resources, which will become
even more challenging during COVID-19. The economic implications related to COVID-19
in those countries include a high cost of care, market failures in pluralistic health systems,
high out-of-pocket expenses, the added burden of noncommunicable diseases, missed
economic opportunities, and socioeconomic consequences like unemployment and
poverty. It is essential to assess the prevalent gaps, mobilize resources, strengthen health
systems financing and leadership, enhance research capacities informing evidence-based
policymaking, and foster effective partnerships for addressing health and economic
disparities due to COVID-19.

The Covid-19 crisis, which first hit the developed world, is now spreading into
developing countries. Experts from the United Nations (UN), United Nations Development
Program (UNDP), and the World Health Organization (WHO) have stressed deep concern
about the long-term impact the pandemic could have on these nations.

Developing countries tend to be poorer, working to become more advanced

economically and socially––their infrastructures aren't as established as those you find in
Europe and the US. They also rely on primary sector roles––all activities that consist of
exploiting natural resources, like agriculture, mining, and forestry––and so they are
particularly impacted by disrupted supply chains and lower demand for their goods.

If a poorer country can't sell its resources, then a huge percentage of its national
businesses and workforces are going to feel the pinch. Therein lies the problem when a
global pandemic hits and their richer trading partners shut their borders.

As a result, developing countries could see income losses in excess of $220 billion,
according to the United Nations Development Program (UNDP).
 PART II
INTRODUCTION

Background

History of Pandemics and Economic Impact

Pandemics are not new and have occurred at different stages in human history
(Ferguson et al., 2020). Table 1 below provides a historical timeline of major pandemics
across the World. While there have been many outbreaks and human catastrophes, there
has been a notable rise in the frequency of pandemics from the year 2000 and thereafter.
This is particularly due to increased emergence of viral disease amongst animals (Madhav
et al., 2017). Given the rise in the frequency of pandemics, many researchers including
Garrett (2007), Keogh-Brown et al. (2008) and most recently Madhav et al. (2017) and
Fan et al. (2018) argue that a large- scale global pandemic was inevitable. Ferguson et al.
(2020) from the Imperial College London COVID-19 Response Team claim that COVID-19
is the most serious episode since the 1918 Spanish Influenza pandemic. Despite the
comparisons, Barro (2020) concludes that the non- pharmaceutical interventions
implemented during 1918 Spanish Influenza pandemic were not successful in reducing
overall deaths. This was because the interventions were not maintained for a sufficiently
long period of enough time. He estimates that the mean duration of school closings and
prohibitions of public gatherings was only 36 days, whereas the mean duration of
quarantine/isolation was 18 days (0.05 years). These numbers were quite small compared
to the number of days that the 1918 Spanish influenza pandemic was active.

Pandemics are expected to have a severe negative impact on economic activities, at

least in the short run. According to Jonas (2013), the impact ranges from: i) avoidance
reaction due to social distancing measures (e.g., individuals might forgo consumption
and purchases of certain goods and services), ii) small direct costs (e.g., hospitalization
and medical costs), iii) larger indirect costs (loss of labor, production), and iv) offsetting
and cascading effects (disruption of services, travel and others). A number of studies
tried to anticipate the economic loss from a pandemic.6 For example, Jonung and
Roeger (2006) forecasted that a hypothetical global pandemic would lead to 1.6 percent
drop in GDP for the European Union. (EU) due to both demand and supply side factors.
Other studies analyze the impact with a historical comparison. For example, ‘how would
the casualty numbers during the 1918 Spanish Influenza pandemic transpire today?’
Barro et al. (2020) estimate that, holding everything else constant, the 2.1 percent death
rate during the Spanish Influenza pandemic in 1918-1920 would translate to roughly 150
million deaths worldwide (compared to the World’s population of 7.5 billion in 2020)
during COVID-19 pandemic. The authors also find that, on average, the 2.1 percent
death rate corresponds to 6 percent decline in GDP and 8 percent fall in private
consumption.

Risk assessment

Likelihood of further spread: Human-to-human transmission, including transmission

within families and healthcare settings. The outbreak continues to grow within the
different countries at a rapid rate. Ordinarily high volumes of domestic and international
travel have been increased further by travel linked to Lunar New Year celebrations.
Imported cases continue to be reported internationally, with several reported cases of
secondary transmission now confirmed in countries outside of China. Limited testing
capacity in many countries globally, non-specific symptoms of 2019-nCoV acute
respiratory disease (the disease caused by 2019-nCoV infection), and co-circulation of
other respiratory pathogens are factors that can complicate efforts to detect the virus
quickly.

Potential impact on human health: The virus can cause severe illness and death,
although most cases appear to be mild. However, many uncertainties remain, including
the full extent of the current outbreak within China, and the full clinical spectrum of
illness, including the prevalence of mildly symptomatic cases.
 Effectiveness of current preparedness and response measures: China has dedicated
substantial resources to public health control measures and clinical management, and has
taken action that has included the quarantine of cities, and the widespread suspension of
transport links between population centres. It will be important to continually assess the
extent to which measures are effective and the need to adapt measures as the situation
evolves. Up to now, countries that have reported an imported case have demonstrated
efficient and effective disease surveillance and response measures. However, some
countries are less prepared to detect and respond to an imported case. Rumours,
misconceptions, and misinformation disseminated online via social media can have a
negative impact on response measures and health-seeking behaviors.

Economic challenges for the health systems in the developing countries

Historically, developing countries have suboptimal diagnostic capacities, which may

have resulted in a low number of COVID-19 cases during the earlier stages of this
global outbreak. However, a delayed diagnosis of COVID-19 may lead to hospitalization
with a need for critical care support. Such tertiary-level services would cost higher than
preventing the disease at earlier stages. It is noteworthy that most healthcare
organizations in developing countries lack critical care services, which implies that the
increased demand for intensive care units or ventilators to stabilize COVID-19 patients
may remain unmet.

In developing countries with a lack of universal health coverage, where the market
plays a dominant role, the cost of care would also depend on the elasticity of health
services and commodities in those contexts. Such economic failures may happen for
diverse health services during managing COVID-19 in institutional settings. Moreover,
continued shifting of health workforce and resources will create critical distributive
issues as patients with other health problems may not receive their designated services
during this pandemic. Therefore, health systems in LMICs that are often under-
resourced and over-burdened are likely to incur a high cost of care and associated
economic failures while addressing COVID-19.
 Another major economic challenge during COVID-19 would be a high out-of-pocket
(OOP) expenditure in developing countries. Most of those nations healthcare
organizations operate within pluralistic health systems incurring OOP for health services.
This economic burden is likely to increase during COVID-19 unless state-sponsored
diagnostic and therapeutic financing is made available. An increased OOP is associated
with subsequent poverty, unemployment, and other socioeconomic consequences,
which may affect individuals and populations in the post-COVID-19 era.

Furthermore, many developing countries already have a high burden of comorbid

noncommunicable diseases (NCDs), which may increase the hospitalization and
mortality across populations while cooccurring with COVID-19. From an economic
perspective, such adverse health outcomes will affect the economic returns on existing
and newly adopted strategies of health systems financing. In addition, many people
with NCDs may experience restricted mobility due to lockdown or lack of transportation,
which will affect their access to health services during COVID-19.

The economic consequences of such missed health opportunities will affect

developing countries, whereas people living in quarantine or lockdown will have an
added risk of

developing NCDs, which may have prolonged economic implications for respective
health systems. Other economic challenges associated with COVID-19 in developing
countries may include but not limit into lost wages and insurance benefits of
hospitalized individuals, suboptimal use of health services which could have been
generated institutional and societal benefits otherwise, and disability-adjusted life years
(DALYs) attributable to COVID-19 in those countries.

Potential Economic and Financial Impacts

To understand the potential negative economic impact of COVID-19, it is important to

understand the economic transmission channels through which the shocks will adversely
affect the economy. According to Carlsson-Szlezak et al. (2020a) and Carlsson-Szlezak et
al. (2020b), there are three main transmission channels. The first is the direct impact,
which is related to the reduced consumption of goods and services. Prolonged lengths of
the pandemic and the social distancing measures might reduce consumer confidence by
keeping consumers at home, wary of discretionary spending and pessimistic about the
long-term economic prospects. The second one is the indirect impact working through
financial market shocks and their effects on the real economy. Household wealth will likely
fall, savings will increase, and consumption spending will decrease further. The third
consists of supply-side disruptions; as COVID-19 keeps production halted, it will
negatively impact supply chains, labor demand, and employment, leading to prolonged
periods of lay-offs and rising unemployment. In particular, Baldwin (2020) discusses the
expectation shock by which there
is a “wait-and-see” attitude adopted by economic agents. The author argues that this is
common during economic climates characterized by uncertainties, as there is less
confidence in markets and economic transactions. Ultimately, the intensity of the shock is
determined by the underlying epidemiological properties of COVID-19, consumer and firm
behavior in the face of adversity, and public policy responses.
Gourinchas (2020, p. 33) summarizes the effect on the economy by stating: “A
modern economy is a complex web of interconnected parties: employees, firms, suppliers,
consumers, and financial intermediaries. Everyone is someone else’s employee, customer,
lender, etc.” Due to the very high degrees of inter-connectiveness and specialization of
productive activities, a breakdown in the supply chains and the circular flows will have a
cascading effect. Baldwin (2020) describes the impact of COVID-19 on the flows of
income in the economy. First, households do not get paid and hence reduce their
consumption and savings levels. The decrease in savings reduce investment and hence
ultimately diminish the capital stock.26 Second, households reduce their demand for
imports, which in turn reduces income for the rest of the World, and hence the country’s
exports decrease. Third, the demand/supply shocks cause disruption in domestic and
international supply chains. Fourth, all of the previous shocks and disruptions lead to a fall
in output – causing reductions in the usage of the factors of production. In this case,
labor is more affected than capital through reduced working hours or layoffs and hence
lower earnings.

It is also important to understand the processes that generate recoveries from

economic crises. Carlsson-Szlezak et al. (2020a) explain different types of recovery after
shocks through the concept of “shock geometry”. There are three broad scenarios of
economic recoveries, which we mention in ascending order of their severity. First, there is
the most optimistic one labelled ‘V-shaped’, whereby aggregate output is displaced and
quickly recovers to its pre-crisis path. Second, there is the ‘U-shaped’ path, whereby
output drops swiftly but it does not return to its pre-crisis path. The gap between the old
and new output path remains large. Third, in the case of the very grim ‘L-shaped’ path,
output drops, and growth rates continue to decline. The gap between the old and new
output path continues to widen. Notably, Carlsson-Szlezak et al. (2020b) state that after
previous pandemics, such as the 1918 Spanish Influenza, the 1958 Asian Influenza, the
1968 Hong Kong influenza, and the 2002 SARS outbreak, economies have experienced ‘V-
shaped’ recoveries. However, the COVID-19 economic recovery is not expected to be
straightforward. This is because the effects on employment due to social distancing
measures/lockdowns are expected to be much larger. According to Gourinchas (2020),
during a short period, as much as 50 percent of the working population might not be able
to find work. Moreover, even if no containment measures were implemented, a recession
would occur anyway, fueled by the precautionary and/or panic behavior of households
and firms faced with the uncertainty of dealing with a pandemic as well as with an
inadequate public health response (Gourinchas, 2020).

Tourism and Covid-19 – Unprecedented economic impacts

Tourism is one of the world’s major economic sectors. It is the third-largest export

category (after fuels and chemicals) and in 2019 accounted for 7% of global trade. For
some countries, it can represent over 20% of their GDP and, overall, it is the third largest
export sector of the global economy. Tourism is one of the sectors most affected by the
Covid-19 pandemic, impacting economies, livelihoods, public services and opportunities
on all continents. All parts of its vast value-chain have been affected.  Export revenues
from tourism could fall by $910 billion to $1.2 trillion in 2020. This will have a wider
impact and could reduce global GDP by 1.5% to 2.8%. Tourism supports one in 10
jobs and provides livelihoods for many millions more in both developing and developed
economies. In some Small Island Developing States (SIDS), tourism has accounted for as
much as 80% of exports, while it also represents important shares of national economies
in both developed and developing countries.

The impact on poorer countries right now

Already, more than 90 developing countries have approached the International

Monetary Fund (IMF) for access to its emergency funding and financial assistance. 24 of
the IMF's low-income member countries are benefiting from immediate debt relief so far.
But the IMF is calling for the temporary suspension of debt payments to banks for the
poorest developing countries.
If we look at Sub-Saharan African governments as an example of how fiscal
inflexibility is damaging their economies when faced with closed borders and disrupted
supply chains, we’re seeing the impact through depressed commodity revenues (less
money for tradeable goods), a collapse in tourism, and lack of foreign investment. 

The issue is more than financial. Fighting the impact of coronavirus goes beyond a
country's ability to repay debt or keep its economy moving. Healthcare systems in the
developing world often lag behind those found in developed nations, both in terms of
technology and capacity. This hampers the initial response to dealing with a surge in
patients, but also means countries may be less equipped for a second wave of infection. 

The stress on health care in developing countries 

Despite all of this, what’s been surprising is that countries reporting the highest
numbers of cases and deaths are wealthier, with developing countries making up
just 2% of the global death toll (as of May 2020).
  
As a former World Bank economist, with over 20 years of experience evaluating and
supporting economic development in African and South Asian countries, Giovanna
points out that the numbers being reported by developing countries likely don’t reflect the
true impact. “The caveat is that the testing done in developing countries is much, much
less than what we’ve had in developed countries or in Europe.” 

In other words, not every case is identified and reported, due to lack of resources.  

This lack of resources and disparity in available healthcare is a big problem for

developing countries, Giovanna adds. African countries, on average, have 2.2 qualified
healthcare workers per 1,000 people (compared to 14 per 1,000 in Europe). Nigeria
is reported to have fewer than 500 ventilators, which are crucial to treating the more
serious cases of COVID-19.   

Countries like China, who are easing out of lockdown, have begun to offer large in-
kind medical donations to less developed countries. Some have labelled this “facemask
diplomacy”.  

Many countries have turned inward during the crisis, dealing first with the stress
within their own healthcare systems before looking to assist other struggling nations. This
means developing countries are simply not being offered the same level of support––both
financially and through healthcare––than they would if this was a crisis solely
impacting the developing world.  

The future impact on developing economies

 Tomasz predicts that we’re likely to see an increase in emigration from developing
countries, as laid-off workers look for jobs elsewhere––most likely in more developed
countries. That will have an impact in two ways. It would leave poorer countries with less
workers to fill essential jobs and contribute to the economy, and also put pressure on
developed countries to support the inflow of new workers.

If developing countries are losing their workforce, then economic recovery will be
slower, and the prospect of paying off debt becomes far more overwhelming.

To put it simply: if developing countries aren’t generating money, they can’t meet the
terms of loans provided by developed countries and banks––such as the US Federal
Reserve and European Central Bank. 

What can be done to help developing countries? 

The United Nations Department of Economic and Social Affairs warns that COVID-19

threatens to undo the progress that has been made since the current Sustainable
Development Goals were introduced in 2015. These call for continued work towards
ending poverty, as well as promoting sustainability across the world.   

Developed countries continue to have a responsibility to developing countries as

Covid-19 begins to take root. The World Economic Forum is calling for an increase in
official funding assistance, broader debt relief, and the urgent establishment of an
international solidarity fund.

But developing countries can also help themselves, Tomasz argues. “What might be
needed is a sort of Marshall plan for many developing countries soon, which would create
a win-win for both developed and developing countries. 
 One solution Tomasz suggests could be for developed countries and banks to consider
writing-off existing debts for developing countries where possible. Developing countries
shouldn’t be penalized for defaulting on payments by further restricting their economies
through new trade barriers or ‘reshoring’ resource industries, e.g. sourcing textile
materials from other countries.  

But, as Giovanna (pictured) points out, this can only be achieved if countries––both
developed and developing––work together.

Growth, poverty and inequality scenarios

On a macroeconomic level, changes in the poverty rate can be decomposed into a

growth component and a redistribution component. All else equal, economic growth helps
lift families out of extreme poverty by boosting average household consumption. Similarly,
inequality reductions allow households on the lower end of the income distribution to gain
even when economic growth remains unchanged. Reduced inequality also raises the
economic growth potential and even multiplies the benign effects of economic growth on
poverty reduction, thus creating a double dividend for poverty. Sadly, the world is
currently experiencing the complete opposite: widespread economic decline and
increasing poverty and inequalities.

The following scenarios estimate the effects of varying shocks to economic growth
and income distribution for developing countries, with divergent recovery paths post-
2021. Specifically, each scenario represents different assumptions about per capita GDP
growth and changes in inequality in developing countries vis-à-vis their baseline forecasts
from the WESP 2020 update, which projects a weighted 2021–2030 average of 3.9 per
cent GDP per capita growth (bearing in mind that individual country forecasts differ
widely) and unchanging inequality through 2030.
 The optimistic scenario assumes average GDP per capita growth in developing
countries to be 3 percentage points above each country’s baseline—with a weighted
average of 6.9 per cent per year—from 2021 until 2030 and a cumulative reduction of
inequality of 25 per cent. (For context, there have only been observed inequality declines
of this magnitude in fourteen developing countries since 1970.) This scenario would be
plausible if a COVID-19 vaccine completely turns around the current prospects for
developing countries and their policymakers manage to substantially boost pro-poor
growth through stimulus spending.

In contrast, the pessimistic scenario explores the alternative outcomes for a reduction
in annual GDP per capita growth by 2 percentage points and an increase in inequality of
25 per cent in all developing countries. This scenario could materialize if the pandemic
were to aggravate existing weaknesses for developing countries, such as high levels of
debt, increasing business failures and bankruptcies, lack of fiscal space and weak
educational systems, leading to long-term stagnation of productivity growth.

To investigate the relative importance of growth versus inequality for poverty, a

growth only scenario has also been modeled in which GDP per capita growth is raised to
that of the optimistic scenario, but inequality is kept unchanged. This could happen if
government stimulus in developing countries were to effectively turn the economic crisis
around but fail to address structural sources of inequality. Finally, also included is a
utopian poverty miracle scenario of unprecedented average GDP per capita growth of
nearly 10 per cent per year and a spectacular reduction in inequality in all developing
countries.

The impact of COVID-19 lockdown in a developing countries

Inadequate food supplies

100% of the research participants reported inadequate food supplies as a result of closing
down of their self-run businesses. They also reported no help from the government,
leaving them experiencing difficulties in getting food supplies.

Hopelessness to revive the business

100% of the research participants reported hopelessness to revive their business due to
spending up of their savings during COVID-19 Lockdown. They also reported a loss of all
their perishable goods at the start of the lockdown.

Poor access to reproductive health services

100% of the research participants reported poor access to reproductive health services
due to poor transport network during lockdown. They also reported poor access to
maternal health services.

Psychological trauma due to anxiety and depression

100% of the research participants reported psychological trauma due to anxiety and
depression caused by economic challenges. They also feared spreading COVID-19 to their
children leading to stress and anxiety.

Defaulting medications for chronic conditions

50% of the research participants reported defaulting medications for chronic

conditions leading to ill health. They also reported difficulties in accessing health services
for chronic diseases like hypertension and HIV.

Challenges of keeping young people indoors

 100% of the research participants reported challenges of keeping young people
indoors due to boredom and short concentration span. They also reported difficulties in
exercising social distancing while in the house due to the size of the room.

Statement of the Problem

This reaction paper was undertaken to measures the impact of Covid-19 to the
different developing countries.

Specifically, the study also sought to present solutions on the problem.

PART III
RESULTS AND DISCUSSIONS

I. Steps taken by the developing countries Government versus COVID-19

Governments around the world have introduced drastic measures to control the
spread of COVID-19 and to manage its impacts. Information on what actions have been
taken in different countries is valuable both for decision-makers and for researchers
aiming to compare actions and assess their effectiveness. However, information on
actions in developing countries is patchy, and it is often hard to compare actions across
countries, as the details of measures taken can vary quite significantly from place to
place.

Dalberg has created a new resource – “The Database of Government Actions on

COVID-19 in Developing Countries”, a database that collates and tracks national policies
and actions in response to the pandemic, with a focus on developing countries. The
database can be found on the Humanitarian Data Exchange, an open platform for sharing
data across crises and organizations that is managed by OCHA’s Centre for Humanitarian
Data.
Information for 20 Global South countries is included in Dalberg’s database – plus 6
Global North countries for reference – that Dalberg staff are either based in or know well.
The database content is drawn from publicly available information combined, crucially,
with on-the-ground knowledge of Dalberg staff.

The database contains a comprehensive set of 100 non-pharmaceutical interventions,

organized in a framework intended to make it easy to observe common variations
between countries in the scope and extent of major interventions. Interventions we are
tracking include:

Health-related: strengthening of healthcare systems, detection and isolation of

actual/possible cases, quarantines
Policy-related: government coordination and legal authorization, public communications
and education, movement restrictions
Distancing and hygiene: social distancing measures, movement restrictions,
decontamination of physical spaces
Economic measures: economic and social measures, logistics/supply chains and
security.

The timing of interventions in relation to caseloads, death tolls, and WHO’s

pandemic classification

Governments took most of their actions to stem the COVID-19 outbreak during the
three weeks around and after the WHO’s classification of the outbreak as a pandemic on
Wednesday 11 March.
 Close to two-thirds of actions (60%) taken by the 25 governments occurred in the
three weeks between 8 and 27 March. These three weeks stand out among others—the
remaining actions are fairly spread out over the weeks before and after this period.

The classification of COVID-19 as a pandemic may have spurred some countries to

take action, while others may have implemented interventions to align with actions taken
by other countries. It is possible that, for some countries, these two considerations—more
so than the course of the pandemic within each specific country—were paramount in
prompting new interventions. 

As evidence of this, it is worth noting that actions taken by countries in the database
are less strongly correlated to the timing of milestones in the progress of COVID-19 in
each country. Less than half of interventions were announced in the three busiest weeks
relative to the dates of the country’s 10th case, 100th case and first death (46%, 49%
and 46% respectively).

While it seems that some countries that took actions early have had better outcomes,
e.g., Taiwan and New Zealand, the full benefits or costs of taking actions earlier or later
will only become apparent after the pandemic is over. Additionally, while the caseload and
number of deaths can serve as indicators of the course of the pandemic, a broader set of
indicators will also need to be studied in order to make these kinds of determinations.

In the coming months, as nations modify, lift, and potentially re-impose restrictions,
the timing of governmental actions will likely remain critical. We hope that The Database
of Government Actions on COVID-19 in Developing Countries—and other databases like it
—can provide policymakers in the midst of this crisis with a reliable source of information
on the range and timing of measures taken by their counterparts around the world. We
hope, too, that the database will inform future research into how the timing of these
interventions ultimately affected their outcomes—and that these analyses can help
improve the effectiveness of decision-making in future public health crises.
II. Resource Management Plan

Successful implementation of adaptive COVID-19 preparedness and response

strategies will depend on all of society being engaged in the plan, and strong national and
subnational coordination. 5 To provide coordinated management of COVID-19
preparedness and response, national public health emergency management mechanisms,
including a multidisciplinary national coordination cell or incident management structure,
should be activated, with the engagement of relevant ministries such as health, foreign
affairs, finance, education, transport, travel and tourism, public works, water and
sanitation, environment, social protection and agriculture. In certain contexts, this may be
through the support of National Disaster Management or other crisis management
authorities.

If they have not done so already, national authorities should, as a matter of urgency,
develop operational plans to address COVID-19. Plans should include capacity
assessments and risk analyses to identify high-risk and vulnerable populations. Plans
should include civil society and national NGOs to extend the reach of public health and
socioeconomic interventions. National plans should also be developed for the prevention
and mitigation of the social impacts of the crisis, including areas of the response that
disproportionately affect women and girls.

For example, many countries that have implemented restrictions on movement

outside of households have reported sharp increases in gender-based violence, primarily
impacting women. Additionally, women are often most likely to be in insecure work and
least likely to be covered by income-protection schemes, which are primarily designed for
workers in formal employment.

PART IV
 CONCLUSION

COVID-19 is affecting global populations indiscriminately; however, the burden of

disease and economic consequences can be much greater, potentially under-reported,
and under- estimated in the developing countries who share a major proportion of the
global burden of diseases without adequate preparedness in their health systems. This
gap between health problems and abilities to address the same is common across those
contexts resulting in adverse economic impacts in a vicious way. Such widespread
disparities necessitate multilevel policies and context-specific strategic approaches,
ensuring optimal care in COVID-19 minimizing economic challenges in the developing
countries.
PART V
RECOMMENDATIONS

1. Strengthen the safety net. The most vulnerable households are those most likely to be
affected economically. Low-wage workers are often those most likely to lose their jobs if
they miss work due to an extended illness. They are often the least able to work remotely
to avoid contracting the virus. And they are the least likely to have savings to survive an
economic downturn. Making sure there is an economic safety net—cash transfers, sick
leave, subsidized health coverage—in place helps the most vulnerable survive and
provides support to enterprises that serve those populations.

2. Measure the impact. Systematic data on which populations are experiencing the

greatest hardships and which industries are failing is essential to providing assistance.
During the Ebola epidemic of 2014-2015, researchers used phone surveys in Sierra Leone
and Liberia—building on the sample frames from existing surveys—to gather just-in-time
information on the impacts of both ill health and aversion behavior on households and
enterprises across the countries. Even as we monitor the health situation across and
within countries, monitoring the economic situation and providing support to households
in need can mitigate the most urgent needs.
3. Support public health systems. As LDCs often lack the productive capacity and financial
resources to obtain necessary health equipment, they need immediate support from the
international community, in addition to support for the long-term strengthening of the
health sector. All governments should refrain from restricting exports of essential
medicines and health equipment, while vulnerable countries need to ease existing import
restrictions. Marginalized countries stand to benefit from increased global efforts to
develop vaccines and effective medications against Covid-19. Such efforts should consider
vaccines as global public goods and ensure they will reach the most vulnerable first.

4. Support affected households and businesses. In addition to increasing budget

allocations for the health sector, most LDCs have already adopted or are developing
programs and measures to provide income or food support to their unemployed and
vulnerable populations. Unfortunately, this is far more difficult than in advanced
economies, as social protection systems are often lacking. Even where they exist, they
often fail to reach workers in the informal economy, who are the most vulnerable and
often constitute a majority. New policy measures could include extending social
protection, for example through basic social security guarantees, in particular to workers
in the informal sector, and by involving local government and non-state actors. The
coverage of migrants from LDCs by social protection systems in host countries could
provide valuable support.
Many LDCs have also adopted or developed support programs that provide loans,
guarantees, or tax relief for firms that are temporarily affected so that workers continue
to receive wage income or at least to ensure the firms still exist if the economies reopen.
While some of these countries have been able to use domestic resources, many others
rely on development partners for funding.

5. Provide external financial resources. The lack of domestic financial resources for
economic stimulus is often a major constraint. Given the limited access to private capital
markets, bilateral and multilateral funding will be essential. The IMF and multilateral
development banks have already started to provide funding on a significant scale, but
these efforts need to be scaled up to ensure that LDCs as the most vulnerable countries
benefit.
As official development assistance (ODA) remains far more important for LDCs than for
other groups (with an average ODA-to-GNI ratio of 5 per cent), the crisis response should
include increasing ODA to rapidly meet existing commitments. Hence, bilateral
development partners should also scale up their ODA in this crisis, rather than using
budgetary constraints caused by Covid-19 as an argument to reduce their ODA.
The Covid-19 crisis also demonstrated the need for debt relief. LDCs will benefit from the
suspension of bilateral loan repayments until the end of the year agreed to by the G20
countries, as well as the IMF’s cancellation of 24 LDCs’ debt payments for six months.
However, these initiatives will certainly need to be expanded.
6. Restart economies smartly. There is a need to think about restarting economies in a
smart way. In the absence of medical treatment or vaccines, or the capacity for “testing,
tracing and isolation”, loosening social distancing provisions will facilitate the emergence
of a second wave of infections. Hence, there is an urgent need for the international
community to support vulnerable countries in developing and implementing strategies for
restarting their economies that take the limitations on capacities and public health
systems into account.

There is also a need for global coordination on loosening economic lockdowns. For
example, tourism dependent economies have limited benefit from lifting restrictions on
foreign arrivals if lockdowns in developed and advanced developing countries continue to
depress external demand.

Restarting LDC economies should go beyond addressing emergency measures and include
policies expanding productive capacities to address the root causes of limited economic
resilience, lack of economic diversification and failure to create decent and productive
jobs. Such policies should be based on strengthening national development governance
that incentivizes the allocation of domestic and foreign resources (public and private) for
industrial and technological upgrading while ensuring social and environmental protection.
It should acknowledge possible impacts on global value chains from the Covid-19 crisis for
the structural transformation of LDCs, for example by strengthening emphasis on regional
approaches to overcome small domestic markets.

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