Current conditions, scenarios and projections to 2030 amid the COVID-19 crisis
3 April 2020 Alicia Bรกrcena
Executive Secretary Economic Commission for Latin America and the Caribbean (ECLAC)
The world is facing a health and humanitarian crisis without precedent in the past century
COVID-19 comes amid an adverse context: global economic growth had been slowing up to 2019 Global GDP growth, 1970–2020a
Growth in global trade volumes, 1982–2019 (Percentages)
Source: ECLAC, on the basis of Department of Economic and Social Affairs (DESA) of the United Nations. a The figures for 2019 and 2020 are projections.
Source: CEPAL sobre la base de datos de la OMC.
2018
2016
2014
Average 2011–2019: 2.6%
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
Average 1997–2006: 6.4%
2012
(Percentages, on the basis of constant 2010 dollars, at market exchange rates)
The crisis will sharpen geopolitical rivalry and the struggle for technological dominance United States: goods trade balance with China, by technology level, 2018 (Billions of dollars)
Source: ECLAC, on the basis of UN Comtrade - International Trade Statistics Database.
China and the United States: Global patent applications, 1990–2018 (Percentages)
Source: ECLAC, on the basis of World Intellectual Property Organization (WIPO).
Five characteristics of the COVID-19 crisis 1. The world is facing a health and humanitarian crisis without precedent in the past century, in what is an already adverse economic context; unlike in 2008, this is not a financial crisis but a crisis affecting people, health and well-being. 2. In a war economy situation, the role of the State, rather than the market, is essential. Governments are therefore taking on a key role to contain the virus and the risks that affect the economy and social cohesion. 3. To flatten the curve of infection will take measures to reduce interpersonal contact, which will cause economic contraction, paralyse production activity and destroy sectoral and aggregate demand. 4. How not to flatten the economy: strict and effective observance of quarantines and public health measures will be the fastest and most efficient way to reduce the economic costs. 5. International cooperation: the way out of the crisis will depend on the economic strengths of each country. Given the asymmetries between developed and developing countries, the role of the United Nations, the International Monetary Fund and the World Bank will be essential to ensure access to financing, safeguard social spending and support economic activities with out of the box measures.
The magnitude of the economic impact will depend on the spread of the virus and the effectiveness of containment measures all over the world Confirmed cases of COVID-19 worldwide and global growth forecast (Number of cases and percentages)
Source: ECLAC, on the basis of Bloomberg Economics, Goldman Sachs and Johns Hopkins University.
Limiting the economic impact of the pandemic: the international response
The economic prescription of the West: fiscal stimulus, State guarantees and economic measures Selected countries: economic measures adopted to face the economic impact of COVID-19
Measure
Countries
Germany
Spain
Italy
United States
State loans and loan guarantees for companies
X
X
X
X
Unemployment subsidies
X
X
X
X
Tax deferral
X
X
X
X
Deferral and subsidization of social security payments
X
X
Deferral of loan payments Source: ECLAC, on the basis of official data. Note: in the United States, includes measures such as tax deferrals (e.g. tax credits, tax filing delays).
X X
X
Fiscal policies for economic recovery and corporate guarantees Selected countries: economic measures (Percentages of GDP) Italy
Germany
Japan
United Kingdom
France
Spain
United States
Fiscal policy
1.1
3.6
0.1
2.2
1.9
1.5
9.3
Heath spending
0.2
0.2
0.2
0.3
Spending on economic recovery
0.9
3.4
1.2
1.2
Other fiscal measures State loans and loan guarantees for companies
19.7
Source: ECLAC, on the basis of official data and IMF.
41
2.7
3.5
0.3
14.9
12.4
8
Germany: subsidies for firms and workers and long-term loan guarantees
Germany: fiscal stimulus by component of spending
Additional guarantees ü Possibility of expanding public debt by € 2 billion ü € 100 billion for equity in struggling firms ü € 100 billion to KfW for company loans
ü Guarantee fund for loans to companies ü € 400 billion for the stabilization fund ü € 822 billion for KFW Source: ECLAC, on the basis of official data and IMF.
Spain: instruments to help firms and workers and health spending Spain: fiscal stimulus by component of spending
Additional guarantees
ü State guarantees for company loans up to € 100 billion (ICO) ü Private investment stimulus: € 100 billion
Source: ECLAC, on the basis of official data and IMF.
France: social security, companies and employment France: fiscal stimulus by component of spending
Additional guarantees
Ăź State guarantees for loans to firms through PBI bank: â‚Ź 300 billion
Source: ECLAC, on the basis of official data and IMF.
Italy: health emergency, unemployment subsidies and help for companies Italy: fiscal stimulus by component of spending
Additional guarantees • Guarantees for loans to firms: ₏ 86 billion
Source: ECLAC, on the basis of official data and IMF.
United States: companies, employment and the public sector United States: fiscal stimulus by component of spending
Additional guarantees Ăź US$ 867 billion in guarantees
Source: ECLAC, on the basis of official data and IMF.
The economic effects of the pandemic on Latin America and the Caribbean
Latin America and the Caribbean: seven years of slow growth with rising poverty, extreme poverty and inequality Latin America and the Caribbean: annual GDP growth and average by decade, 1951–2020
Latin America: poverty and extreme poverty rates, 2002–2019 (Percentages)
(Percentages)
10
1951–1959: 5.0%
1960–1969 5.8%
1970–1979 1980–1989 1990–1999 2000-–009 6.0% 2.8% 3.0% 2.2%
2010–2019 1.9%
8 6 4 2 0 -2 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
-4
Source: ECLAC, on the basis of official figures.
Source: ECLAC, on the basis of household survey data bank (BADEHOG).
The worst investment performance since the lost decade and falling productivity relative to the rest of the world Latin America and the Caribbean: rate of change in gross fixed capital formation, 1971–2018
Source: ECLAC, on the basis of official data.
Latin America and the Caribbean (17 countries): labour productivity relative to the rest of the world, 1950–2018 (Rest of the world=100)
Source: ECLAC, on the basis of Total Economy Database, The Conference Board.
The start of a deep recession? Facing the pandemic with a weak economic performance GDP growth rates: world and Latin America and the Caribbean, 2019–2020 (Percentages)
Latin America and the Caribbean: GDP growth projections, 2020 (Percentages)
This projection considers only the external transmission channels of the crisis, and the effects of the economic contraction in China.
-1.8
Source: ECLAC, on the basis of official data.
However, confirmed cases of infected people have spread to the European Union, the United States and LAC countries. Therefore, greater economic impacts for the region are expected. In that context, -1.8% should be considered as a baseline projection.
Institution
Rate
Date
Goldman Sachs
-3.8%
27/3
Capital Economics -1.9%
27/3
Bank of America
-1.6%
19/3
Credit Suisse
-1.5%
17/3
ECONOMIC IMPACTS OF COVID-19 IN LATIN AMERICA AND THE CARIBBEAN Direct impacts on health systems
Measures to limit direct costs: quarantine and social distancing
Education
Extraordinary burden on insufficient and fragmented systems
Commerce
Unequal access to medical treatment by income, health insurance and place of residence
Manufacturing
Suspension of domestic production
Tourism and transport
Higher unemployment
Global recession
Natural resources
Medium- and long-term impacts • • • • •
Indirect impacts on supply and demand
Bankruptcies Downturn in private investment Weaker economic growth Less integration into value chains Erosion of productive capabilities and human capital
Short-term effects • • • •
Higher unemployment and more precarious working conditions Lower wages and incomes (contraction of consumption) Increasing poverty and extreme poverty Health systems: higher costs, fragmentation and inequalities of access
Direct effects: Capacities of health care systems
The health-care infrastructure is insufficient to address the problems created by the pandemic Latin America and the Caribbean: number of hospital beds per 1,000 people, 2018 or latest available data
Selected countries: intensive care hospital beds per 10,000 inhabitants, 2018 or latest available data
Source: ECLAC, on the basis of data from the Organization for Economic Cooperation and Development (OECD). Source: ECLAC, on the basis of Central Intelligence Agency (CIA), The World Factbook 2018, Washington, D.C., and data of the Organization for Economic Cooperation and Development (OECD).
The health-care system in the region does not have the human resources needed to address the pandemic Latin America and the Caribbean and other countries: doctors per 1,000 inhabitants, 2014
Source: World Health Organization Global Health Observatory . The regional figure is a simple average of 24 countries.
The region’s inequalities in access to health care are increasing the economic and social cost of the crisis Latin America (14 countries): affiliation or contribution to health systems by employed persons aged 15 and over, by per capita income deciles, national totals, 2002–2016
§ Health-care systems with considerable fragmentation between services, differentiated by income levels
(Percentages)
§ In the bottom income decile, just 34% of workers contribute to or are affiliated to a health system
Source: ECLAC, Social Panorama of Latin America, 2018 (LC/PUB.2019/3-P), Santiago
To strengthen health systems, public spending must be increased and improved Latin America and the Caribbean: health sector spending as a percentage of GDP, 2019
§ On average, the countries of the region spend 2.2% of GDP on health § The health-care systems in the region were already under pressure from the dengue epidemic
§ Fiscal space must be found to strengthen Source: Source: Economic Commission for Latin America and the Caribbean (ECLAC), Social Panorama of Latin America, 2018 (LC/PUB.2019/3-P), Santiago. the region’s health United Nations SDG Indicators (2020) [online] https://unstats.un.org/sdgs/indicators/database/ care systems
Indirect effects: a slowdown in global demand and disruption of value chains
Six external transmission channels will affect the regional economy A drop in trade with key trading partners
Less demand for tourism services
A fall in commodity prices
Disruption of global value chains
Decline in remittances
Heightened risk aversion and worse global financial conditions
The value of exports is expected to fall by 10.7% in 2020, owing to falling prices and lower global aggregate demand Latin America and the Caribbean: impact of COVID-19 on goods exports by subregions and major exporting countries, forecast for 2020 (Percentage change)
-4.0% -7.4% -9.3% -10.7% -13.8%
Source: ECLAC.
The disruption of production chains is having a significant impact on the regional economy, owing to its engagement in low-tech activities Selected countries, manufacturing: final aggregate demand value, by origin (Percentage of countries of origin in total final demand)
Origin
Ø The disruption of global value chains has crucial repercussions for the region: • Disruption of the related production activities • A slump in related service activities • A decline in the supply of imported goods Ø One of the first sectors to be affected was manufacturing, and particularly the automotive industry, which the region participates in through low-tech links in chains.
Source: Source: Economic Commission for Latin America and the Caribbean (ECLAC), Organization for Economic Cooperation and Development (OECD) Trade in Value-Added (TiVA)
Destination
Regional integration is crucial to addressing the crisis The size of the manufacturing sector is important in terms of scale, scope and know-how Selected countries, manufacturing: global final aggregate demand (Billions of dollars, 2015)
•
The countries of the region have unsophisticated production capacities, which are fragmented at the regional level
•
National and regional capacities must be bolstered to address the crisis, primarily in production and supply of basic necessities
•
Intraregional trade and logistical integration must be promoted, to guarantee the supply of goods and to sustain regional production activities
•
It is essential to continue to build regional spaces and strengthen complementarities between countries’ production systems to reduce their external vulnerability and increase international competitiveness
The importance of medical supplies during the COVID-19 crisis. The pharmaceutical industry is concentrated above all in Europe, North America and Asia World: pharmaceutical sector exports, 2018 (Millions of dollars)
European Union
United States and Canada
Asia
Latin America and the Caribbean
Switzerland
Latin America and the Caribbean: pharmaceutical sector exports, 2018 (Millions of dollars)
United Kingdom
Source: Economic Commission for Latin America and the Caribbean (ECLAC), World Trade Organization.
Total: ≈ US$ 7 billion
The supply of pharmaceutical products is crucial. Trade must be facilitated and tension must be reduced to ensure the passage of and access to medication and medical equipment Latin America: pharmaceutical sector imports, 2018 (Millions of dollars)
Caribbean: pharmaceutical sector imports, 2018 (Millions of dollars) 250
Total: ≈ US$ 25 billion
200
Total: ≈ US$ 500 million
150 100 50
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An tig
Be liz
Tr Ja in m id ai ad ca an d To ba go Ba ha m as Gu ya na Ba rb ad os
0
Source: Economic Commission for Latin America and the Caribbean (ECLAC), World Trade Organization
Towards a new production geography? Nationalization and regionalization § The crisis has highlighted the exposure of national economies to vulnerabilities arising from offshoring production. § Production models will be redefined and global interdependence will decrease, replaced by national and regional policies. § Countries have started to restrict exports of medical equipment and pharmaceutical goods. § Latin America and the Caribbean does not have the production capacity to withstand an across-theboard disruption of value chains. § Countries’ resilience will depend on the complexity of their production structures and the level of regional integration. § The crisis will deepen inequalities between the subregions. § Investing in strengthening regional production capacities is imperative, to reduce production and technological vulnerability.
Internal effects: Measures to contain and prevent the virus, and suspension of economic activities
Full containment measures would have a cost in terms of output (up to 67% of GDP) and employment (up to 64% of formal employment) Latin America and the Caribbean: 2018 formal employment by sectors of economic activity
Latin America and the Caribbean: 2018 GDP by sectors of economic activity, percentages (Percentages)
Sectors that may shrink
Commerce, hotels 14% and restaurants
13%
Transport
7% 2%
(Percentages)
Sectors that may shrink
6% 5%
67%
Business services
Social services
10% 19%
0% 1%
24%
Commerce, hotels and restaurants
12% 8% 15%
64%
Transport Business serviecs
Social services
25% 6% 8% 25%
The impact of social distancing measures on employment may be amplified by the deterioration in the distribution of employment, high proportions of own account workers, and high levels of informality Latin America (10 countries): economic growth and year-on-year growth in employment, by employment category, 2010 – first quarter 2019 (Percentages)
Source: ECLAC, on the basis of official figures.
Latin America (10 countries): year-on-year change in informal employment rate, 2018 and 2019a (Percentage points)
Source: ECLAC, on the basis of official figures. a The 2019 data refer to the year-on-yea change in the period from January to September.
Containment and quarantine measures are exacerbating the care crisis in the region § Prior to the health crisis, women spent 22 to 42 hours a week on domestic and care work activities. § Women are particularly affected by the pressure on health systems because they account for 72.8% of people employed in the sector in the region § The vulnerability of paid domestic work (11.4% of working women in the region) is increasing: • • • •
77.5% of those engaged in paid domestic work are in the informal sector Increased workloads as a result of school closures Higher demand for health care Restrictions on movement are preventing female domestic workers from doing their jobs
Limiting the economic impact of the pandemic: the region’s response
The impact will depend on the containment and mitigation measures implemented by the countries 1. Duration of the health crisis: social distancing measures. 2. Social impacts through employment and household income. The services sector, which accounts for a large share of employment and GDP, will be the hardest hit. 3. Impact on productive capacity through the effects on SMEs, large companies and productivity. 4. Fiscal impacts, deficits and debt owing to weaker economic activity: ยง ยง ยง
The world and the region are facing a recession that will have shortand long-term effects. The key will be minimizing pandemic costs and ensuring that growth resumes. The magnitude will depend, among other factors, on the strength of the economic response, in which fiscal policy plays a fundamental role.
The region’s countries have implemented immediate measures to contain the virus and protect the workforce and household income • Restriction and monitoring measures for travellers from areas affected by COVID-19. • Flight bans (to and from specific countries) and border closures. • Distance learning and homeschooling with asymmetries in connectivity. • Social distancing, with the closure of restaurants, bars, cinemas, the encouragement of teleworking and reduced office hours. • Health infrastructure in the region is fragmented (2.5 beds / 1000 people). • Strengthening of the capacity of the health sector: beds, mobile hospitals, medical supplies.
• Total quarantine with working arrangements: legal measures for teleworking, reduced working hours, introduction of flexible hours, advance leave, and protection of workers from dismissal. • Protection of the workforce and income: wage support to offset loss of income through advance payments, wage subsidies or the strengthening of unemployment insurance and the suspension or reduction of payments of contributions for water, gas and electricity services and to private pension funds. • Social protection to reduce the social impact on people with the lowest incomes through subsidies, cash transfers or advance payments through ongoing social programmes and social protection schemes. • SMEs and other companies: financial support for SMEs and the informal sector, in order for banks to renegotiate or improve conditions for loans to SMEs and the informal sector.
Monetary, fiscal and social measures to avoid the collapse of the economic system •
Monetary and financial sector: preserving bank liquidity and trade, addressing public and private debt, central bank interest rate cuts, special credit lines and additional loans, extending repayment deadlines (for consumers and companies) or mortgages, and renegotiation of loans and credit by banks and businesses.
•
Fiscal: flexibility to redirect State budgets, tax relief, postponement of deadlines for filing tax returns or tax exemptions for certain economic sectors. Ministries of finance will have to reorganize budgets and seek additional financing to channel resources towards urgent short-term measures.
Examples of large fiscal packages: Argentina, the Bahamas, Barbados, Belize, Brazil, Chile, Guatemala, Honduras, Jamaica, Paraguay, Peru, Trinidad and Tobago and Uruguay have implemented packages ranging from 0.2% to 4.7% of GDP. •
Preserving productive capacity and creating conditions for the revival of economic activity through liquidity mechanisms for companies, particularly SMEs.
•
Expanding social protection systems to ensure that they cover underemployed or self-employed workers, young people, women, children and older persons.
However, many middle-income countries lack the fiscal space to implement stimulus measures. International support is urgently needed Fiscal measures to address the effects of the pandemic and central government debta (Percentages of GDP)
COVID-19 economic measures (Percentage of GDP)
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures and International Monetary Fund (IMF). .a The estimated amounts of the packages do not necessarily represent additional spending.
Country
Fiscal measures
Chile Brazil Trinidad and Tobago Paraguay Honduras Barbados Jamaica Argentina Guatemala Belize Peru Uruguay Bahamas
4.7 3.5 3.3 2.5 2.2 1.4 1.1 1.0 1.0 1.0 0.8 0.7 0.2
§ § § § § §
The countries of the region have implemented immediate measures to contain the virus
Measures for the restriction and monitoring of travellers from areas where outbreaks have occurred. Flight bans (to and from specific countries) and border closures. Distance learning and homeschooling despite asymmetries in connectivity. Social distancing. Strengthening of the capacity of the health sector. Total quarantine with flexible working arrangements. Latin America and the Caribbean: measures taken to limit the spread of COVID-19
The countries of the region have implemented immediate measures to limit the economic impacts of the crisis § Protection of the labour force and income. § Social protection to reduce the social impact on the lowest income groups. § Measures to support SMEs and companies. § Fiscal policies and instruments to stimulate and protect economic activity. § Monetary policies to guarantee the functioning of the financial and banking system. § Measures to preserve production capacity.
Latin America and the Caribbean: measures taken to mitigate the economic impact
In the short term, implement immediate measures —adapted to countries’ realities— to flatten the curve of contagion without flattening the economy 1.
Address the health emergency • •
Immediately and efficiently implement the containment measures suggested by WHO. Strengthen health systems and guarantee universal access to testing, medicine and treatment.
2. Address the social emergency • Emergency basic income that guarantees consumption for the entire population, especially the vulnerable segments. • Employment protection measures, unemployment subsidies and leave. • Measures to support SMEs and own-account workers.
3.
Address the economic emergency • • •
Fiscal policy: reorganize budgets (and if necessary access savings or take on debt) to implement fiscal stimulus packages in order to strengthen health systems, protect income and minimize the contraction of the economy. Monetary policy: stabilize exchange rates and protect the solvency and functioning of the banking market. International cooperation: reconsider the concessional loan and graduation policies of international organizations. Facilitate low-interest loans and postpone debt servicing for developing countries including middle-income countries.
In the long term, the region must rethink its development strategies 1.
Strengthening of subregional and regional coordination and integration: • • • •
2. 3.
4.
Secure supply chains of critical goods. Voluntary, not forced, migration. Poverty relief and reduction of inequality. Strengthen intraregional trade and production chains.
A regional fund dedicated to the specific needs of middle-income countries to support social, economic and productive recovery. Managing debt in a difficult and uncertain macroeconomic context will require flexible support from multilateral financial organizations. Developing countries must collectively negotiate loans with favourable conditions and debt servicing, and review the graduation policies for middle-income countries. ECLAC provides an intergovernmental platform to bring together stakeholders from the public and private sectors, civil society and academia to develop policy solutions for the long-term impacts of the crisis and to monitor its impacts.
The uneven progress made on the SDGs, especially in light of the pandemic, is at odds with the comprehensive spirit of the 2030 Agenda
Simulation exercises for 72 statistical series of SDG indicators The simulations continue the simulation exercise presented by ECLAC at the high-level political forum on sustainable development in 2019: •
Series for all the SDGs
•
The number of series quadrupled from 18 to 72
•
69 series belong to the set of 150 indicators prioritized for the region
Categories used for the classification of indicators Target likely to be reached only with significant public policy intervention Progress stalled
•
49 targets analysed (53% of the targets covered by the indicators prioritized for the region) Regression
Target likely to be reached with public policy intervention Target likely to be reached on the current trend Target already reached
Even before the pandemic, extreme poverty would only have been possible to eradicate with strong redistribution of income and high GDP growth Latin America: projected regional extreme poverty rate in 2030 with different scenarios of per capita GDP growth and changes in income distribution, not including the impact of COVID-19
META
Erradicar la pobreza extrema
Source: ECLAC, on the basis of household survey databank (BADEHOG).
A preliminary estimate of the potential impact of COVID-19 on extreme poverty in 2020 suggests that the target of SDG 1 will not be met Latin America: projection of the extreme poverty rate to 2030 in various scenarios of per capita GDP growth and income distribution change, and a simulation of the impact of COVID-19 on extreme poverty in 2020
Effect of Covid-19
Erradicar la pobreza extrema
Source: ECLAC, on the basis of household survey databank (BADEHOG)
Warning signs just 10 years from 2030 Progress with 72 statistical series for the indicators for the 17 SDGs in the region SDG
No. of series
4 15
8 13 27
5 Source: ECLAC.
Degree of progress
Target already reached Target likely to be reached on the current trend Target likely to be reached only with more public policy intervention Target likely to be reached only with significant public policy intervention Progress towards the target stalled Regression from the target
Moving into a decade of action and delivery § Policies to implement the 2030 Agenda are more crucial than ever. § The new global panorama with COVID-19 reaffirms the need for urgent actions. § It is imperative to assess the impact of such policies. To support follow-up and monitoring of progress in the medium- to long-term, ECLAC has launched two instruments : § The Sustainable Development Goals Gateway § The COVID-19 Observatory in Latin America and the Caribbean : § An undertaking coordinated by ECLAC with support from the United Nations Resident Coordinators. § The Observatory will provide updated information on policy announcements by each country and other material of interest. § It contains information on movements within and between countries, as well as on health, employment, the economy and schooling.
The region has no other strategic option but to move towards a more sustainable development model, through greater integration • Only a new development model will prevent a return to the path that led to a situation in which the impact of the pandemic may be devastating in the short term but may also hit the conditions for recovery and development.
• Latin America and the Caribbean needs a strategy to: • • • • •
Diversify its economic structure Integrate its production and commerce Step up actions to adapt to and mitigate the environmental emergency Strengthen policies to combat poverty, inequality and the culture of privilege Implement social protection policies, with universal coverage
Annex: Policies for tackling the pandemic
ECLAC proposes taking immediate action, to flatten the contagion curve… Type of measure
Policy area
Goal
Required actions
Take decisive early action to prevent COVID-19 from spreading further or bringing its spread to a halt
Measures to support people
Health
Containing and preventing transmission of the virus, to end the pandemic.
Increase the resilience of health care systems
Specific actions
• Perform testing to detect all cases as soon as possible. • Implement measures, such as quarantine, telework and school closures, to strictly restrict movement of people and reduce person-to-person contact. • Provide safe and effective clinical services to effectively isolate all COVID-19 cases. • Protect medical workers and maintain the supply of medical essentials by managing the supply chain.
• Develop, produce, distribute and make available laboratory testing kits, reactants, support material and infrastructure, to ensure that all those who require testing have access • Ensure that basic medical supplies arrive • Ensure that supply chains are protected and prioritized and continue to operate efficiently, and that products are distributed according to need. • Diagnosis, medicines and vaccines for all those who need them, and ensure equiable access.
…taking into account the needs of SMEs and the most vulnerable sectors Type of measure
Measures to support people
Policy area
Protecting employment and the most vulnerable
Goal
Address the various social dimensions of the crisis, focusing on the segments of society that are at risk (women, children, workers with low wages, small and medium-sized enterprises, the informal sector and vulnerable groups)
Required actions
Specific actions
Specific, direct support for SMEs
• Provide assistance to maintain the flow of essential inputs, end products and services. • Consider temporarily reducing social security contributions and value added tax and offering tax rebates. • Interest-free borrowing for companies to pay wages. • Deferral of loan payments. • Subsidies can facilitate payment of rent, public services, wages and basic services.
Measures to support continued employment
Measures to protect the vulnerable population
• • • • • • •
Financial support for the unemployed and underemployed Financial support for self-employed workers, people who have been dismissed Paid leave to care for family members or for medical reasons Moratorium on rent payments, bills for public services, value added tax Deferral of tax, social contributions, loan payments Subsidies for home-based care Support for people who do not have paid leave for illness, unemployment insurance or illness benefits
• •
Use finance to support human rights and the most vulnerable Fiscal stimulus and social protection packages must directly target the people who are worst positioned to weather the crisis Introduce an emergency universal basic income Support people who do not have paid leave for illness, unemployment insurance, or illness benefits Expand non-contributory social protection programmes, such as cash transfers Implement pricing regulations and combat speculation with critical products
• • • •
Flattening the curve of contagion without flattening the economy requires the State to play an active role Type of measure
Policy area
Goal
Required actions
Fiscal policy
Measures to support the population and the economy
Economic policy
Protect the population and prevent socioeconomic collapse
Monetary policy
International and regional cooperation
Specific actions • Reorganize budgets to channel resources towards urgent short-term measures: o Control the pandemic and protect the health of the population, guaranteeing the resources required by the health sector. o Strengthen social protection systems that cater to the most vulnerable and middle-income strata through direct transfers, unemployment insurance, and benefits for underemployed and own-account workers. o Protect productive capacity and create conditions for the revival of economic activity through liquidity mechanisms for companies, particularly SMEs. § Budget reorganization will probably not be enough to finance these measures. Hence, savings from sources such as sovereign funds and/or debt will have to be used, if available. • Greater fiscal spending should be accompanied by greater external financing.
• Exchange rate stability requires central banks to intervene in foreign exchange markets. • Maintaining solvency and the proper functioning of the banking system: commercial banks must have access to suitable levels of liquidity. • Commercial banks must be able to postpone the debt payments of companies and households. • Managing debt in a difficult and uncertain macroeconomic context will require flexible support from multilateral financial organizations, which must reconsider their concessional loan and graduation policies. Policies for low-interest loans and the postponement of debt servicing for developing countries, including middle-income countries, are also required. • Moreover, extraordinary measures for coordination between ministries of finance and central banks could be required to finance and support liquidity flows that governments should provide to households and productive sectors. Developing countries must negotiate favourable conditions to address the crisis collectively, not on a countryby-country basis, with multilateral credit institutions, particularly IMF and World Bank. These institutions should, for example, grant loans at favourable interest rates and provide debt relief by postponing payment deadlines and even forgiving the debt owed by countries weighed down by their obligations. • Developed countries should act in a coordinated manner to avoid the worsening of external conditions for developing countries owing to massive capital outflows and ensure that they have the necessary fiscal space to face the crisis.
Examples of measures: financial and monetary policies Policy area
Economy
Policy sub-area
Policy tools
Financial and monetary policies
• Monetary flexibilization • Cuts in interest rates/benchmark rates • Loans for companies affected by COVID-19 • Deferral of business tax payments • Temporary waiver of tax payments for (certain) companies • Agreement to reduce rates and cost of sending remittances to below 3% or to 0% for the first six months • Exchange-rate stability • Safeguard banking system operation and solvency
Examples of measures: support for SMEs Policy area
Policy tools
Policy sub-area
• • • •
Economy
Support for SMEs
Boosting demand is one of the best ways to support SMEs. Subsidies Suspension of rental payments / public utility bills Payment of deferred/cancelled social security contributions (especially for SMEs and family firms) Commercial banks should postpone debt payments, interest and other changes and, above all, refrain from imposing sanctions on clients. Customers should also be able to reprogramme and restructure debt. Banks could also lower the cost of their services (commissions, for example). Lastly, banks should set up new emergency credit lines: the financial systems in the region have the resources and the liquidity to do this. Finance has been one of the most profitable sectors since at least the early 2000s.
Examples of measures: employment and productivity Policy area
Policy tools
Policy sub-area • • • • •
Economy
Employment and productivity
• • • • •
Financial support for the unemployed Financial support for independent workers/ those laid off Paid family / medical leave One-off payment to those on low incomes Suspension of rental payments / public utility bills / VAT Deferral of tax / social contributions / loan payments Regulation of prices and speculation on critical products Subsidies for home care Support for those without paid sick leave / employment insurance for illness. Mortgage protection must be considered to safeguard access to housing and shelter.
Examples of measures: poverty, social protection and inequality Policy area
Policy tools
Policy sub-area • •
Economy
Poverty, social protection and inequality
• • •
Social protection measures must take inequality into account and be designed to serve the most vulnerable. Place finance at the service of human rights and the most vulnerable. Packages of fiscal stimulus and social protection must directly target those least able to weather the crisis. Support for those without paid sick leave or sick leave through employment insurance. Ensure access to broadband and digital tools, especially for the most vulnerable.
Examples of measures: older persons
Policy area
Social
Policy sub-area
Older persons
Policy tools
Incorporate an age perspective into national and regional policy planning on COVID-19. Social distancing policies should take into account older persons who depend on others for care or support and need food and other essential supplies. Oversight focused on support services and response for older persons.
Examples of measures: gender Policy area
Policy tools
Policy sub-area • • •
Social
Gender
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Need for data disaggregated by sex, to indicate how the situation is evolving, including differentiated rates of infection, economic impacts, care burden and incidence of domestic violence and sexual abuse. Ensure that gender analysis and experience on gender is included in response teams and working groups at the national and regional levels. UN-Women stands ready to support these efforts. Ensure that social protection plans and emergency economic measures, including for economic stabilization and recovery, take into account women who perform unpaid care work. Ensure continuous delivery of sexual and reproductive health services. For example, some countries have taken measures to give women access to contraceptives without a prescription during the crisis. Ensure that special services are set up for gender violence prevention and response, such as direct lines, police units and new protocols for shelters. Support for front-line women’s organizations and women’s leadership and participation in short- and long-term response plans.
Examples of measures: education Policy area
Policy tools
Policy sub-area •
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Social
Education
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Convene a coalition of firms to support countries in offering inclusive distance education, aligned with national study plans, as a response to the closure of schools and universities. Provide technical assistance and advice to governments working to deliver distance education. Develop national learning platforms. Make digital learning resources available for teachers and parents: free online multilingual educational applications to help parents, teachers and schools to facilitate learning, and provide social care and interaction while schools are closed. Develop webinars for staff in ministries of education and other stakeholders to share information on the countries’ efforts to keep education inclusive in different contexts. In countries where schools remain open and meals programmes continue, it is essential to ensure adherence to standards of hygiene, behaviour, food security and quality, and to observe social distancing measures to reduce the risk of infection. Countries where schools are closed need to seek alternatives depending on the context. This includes providing rations for the home instead of school meals, or cash or vouchers. Identify alternative methods and coordinate the delivery of social services for essential workers.