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- Unlike advanced economies, developing countries would not be able to achieve pre-pandemic economic levels by 2023.
- As per the WHO, 85% of people in Africa have not received a single COVID-19 vaccine dose, while 36 countries have still not reached the 10% mark.
- Amid rising inflation, many emerging and developing economies, some knee-deep in debt, would withdraw policy support before the recovery is complete.
The first two weeks of 2022 were nothing different from last year in terms of the COVID-19 impact, except that the Omicron variant replaces the Delta variant across almost all countries. The increasing infection tally of Omicron cases has once again put economic growth on the skids.
As per the World Bank’s latest Global Economic Prospects report, global growth is expected to slow down year after year from 5.5% in 2021 to 4.1% in 2022 and 3.2% in 2023 as fiscal and monetary support measures are rolled back and increased demand gradually subsides.
However, the COVID-19-induced economic shock may hit some countries more severely than others. The World Bank’s data indicates that the economic slowdown would widen divergence in growth rates between advanced and developing countries. The moderate pace of decline in growth rate for advanced economies would allow for restoring output and investment to the pre-pandemic level by 2023. However, this is not the case with emerging and vulnerable economies.
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Image Description: Economic challenges
The world is witnessing a huge spike in infections, particularly driven by the Omicron variant. However, Omicron seems less severe when compared to the Delta variant. This can be attributed to widespread immunity from vaccination or previous infections as most people admitted to hospitals are unvaccinated.
However, achieving the targeted vaccination rate of 70% for all countries by the end of this year still remains a challenge, especially when it comes to emerging or vulnerable economies. WHO Director-General pointed out that more than 85% of people in Africa had not received a single vaccine dose. Meanwhile, the vaccination rate in 90 countries is still below 40%, with 36 of those countries still not reaching the 10% mark.
The inflation rate known to hard-hit low-income workers is running high for both developed and emerging economies, constraining monetary policies. However, developing countries are not as well positioned as their counterparts to sail effectively through the inflationary landscape.
Emergency social transfers deployed in low-income countries to offset the impact of the pandemic did not earlier prove sufficient to prevent job losses, especially for the less educated workers and women. With inflation rising high, many emerging and developing economies, with some of them in knee-deep debt, would withdraw policy support before the recovery is complete.
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Remote working emerged as a critical solution to sustain business activities and prevent job losses. However, such leverage was majorly available to educated workers and in economies where technological infrastructure was sufficient to sustain a sudden rise in demand.
On the other hand, young and less-educated workers particularly in low- and middle-income countries were more likely to lose their jobs in the immediate aftermath of the pandemic. Human capital in such countries is exposed to suffer lasting damage due to school closures and sustained disruptions to healthcare services.
Meanwhile, developing countries often being the last in the global supply line have been hit by supply bottlenecks, with supply chain disruptions increasing costs and delays.
While all economies continue to struggle against pandemic implications, economic implications could be more severe for emerging and developing countries, owing to their lack of resources to fast track vaccination and rebuild the economy. As a result, several measures, including debt restructuring for low-income countries under stress, are being called for to support recovery.
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