Category: Reports

Sherillyn Raga, January 2022

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The socio-economic collapse induced by the Covid-19 pandemic in 2020 has called for stronger government intervention to support the most vulnerable households, firms and sectors. In response, fiscal stimulus packages announced globally from January 2020 to June 2021 have reached $17 trillion (IMF, 2021b). Options for spending fiscal resources have evolved from measures to address immediate health needs, to addressing the economic fall-out from social distancing measures and lockdown, and to building the foundations for more resilient, climate-friendly, gender-sensitive and transformative economic recovery. However, the fiscal resources available to low-income countries (LICs) remain extremely limited, pushing governments to be highly selective in deploying the interventions that would have the most positive short-term and long-term impact.

This paper reviews 94 cross-country, regional and country-level empirical and descriptive studies to identify evidence on fiscal multipliers – the output growth impact of fiscal policy[1] – to provide evidence-based insights to low- and middle-income countries on using fiscal interventions to have the most impact in boosting inclusive and sustainable economic growth.

[1] This paper focuses on fiscal multipliers that measure the impact of government measures on output. However, the literature also offers alternative measures of fiscal multipliers in terms of responses from trade, investment, employment and unemployment, and inequality, among others.

Workers preparing to build a road in Bangladesh. Scott Wallace / World Bank.  License: (CC BY-NC-ND 2.0)

Sherillyn Raga, Dirk Willem te Velde and Maximiliano Mendez- Parra, December 2021

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The Government of Kenya and its support agencies depend on product-specific and export-destination-specific data analysis to help target appropriate polices to support Kenya’s exports. Despite the weak performance in output in 2020, the value of Kenyan goods exports remained relatively resilient by recording growth of 3.3%, up from $5.8 billion in 2019 to $6 billion in 2020 (UNCTAD, 2021). Exports of goods and services could be an important channel for Kenya’s economic recovery from Covid-19, yet they have been falling as a percentage share of gross domestic product (GDP), down from 22% in 2010 to 10% in 2020. Hence, much remains to be done to promote Kenya’s exports. This paper analyses promising exports at the level of product and export destination. It has two major parts: the main part is an empirical analysis of comparative advantage of Kenya’s exports, followed by a review of constraints to develop Kenya’s exports and a set of suggestions.

Farmer harvesting his crops on a farm in Kenya. Peter Kapuscinski / World Bank.  License: (CC BY-NC-ND 2.0)

Phyllis Papadavid and Laetitia Pettinotti, November 2021

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A combination of monetary policies and public investment can address gender biases in an economy by supporting equality among entrepreneurs, workers, carers and consumers. Recent recovery interventions from central banks have not explicitly considered the impacts of their policies on gender equality, which is a missed opportunity. This paper discusses the gender implications of monetary policies, arguing that they are not gender neutral. We examine the evolution of monetary policies in Bangladesh, Kenya, Peru, Sri Lanka and Tanzania and discuss the indirect gender equality implications of these policies. The aim is to complement the country case studies of the project ‘Shaping the Macro-Economy in Response to Covid-19: A Responsible Economic Stimulus, a Stable Financial Sector and a Revival in Exports’.

Photo: Finances. Arne Hoel / World Bank. License: (CC BY-NC-ND 2.0)

Sherillyn Raga and Dirk Willem te Velde, 22 June 2021

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The UK’s integrated review indicated more efforts towards deepening engagement with Indo-Pacific countries by sustaining and supporting bilateral and multilateral partnerships in the region, including with the
ASEAN. In June 2020, the UK applied to be one of ASEAN’s
Dialogue Partners, which would allow the UK to attend high-level
ASEAN meetings together with the US and China, and
would facilitate further practical cooperation with the regional
bloc. All ASEAN countries are also members of the Regional
Comprehensive Economic Partnership (RCEP), while some
are in the Comprehensive and Progressive Agreement
Trans-Pacific Partnership (CPTPP), with whose members
the UK recently launched accession talks. This note
presents the trends in UK FDI in ASEAN, compares UK
investment with that of other major investors such as China
and US, and makes recommendations for boosting the role
of the UK in bringing quality investment to the region,
especially to the poorer ASEAN members.

Photo: Virtual Meeting Between ASEAN Foreign Ministers and The Foreign Secretary of The United Kingdom on COVID-19. ASEAN Secretariat/ Kusuma Pandu Wijaya. Licence: (CC BY-NC-ND 2.0)

Dirk Willem te Velde, 7 May 2021

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Asia-Pacific is the world’s largest region in terms of population and the most heterogeneous in terms of geography and economic development. It is expected to see a multi-paced recovery from the Covid-19 pandemic, depending on the spread of the virus, the rollout of vaccines and economic ties with East Asia, which is seeing signs of economic recovery. How Global Britain can best engage with a multi-speed region remains to be seen. ODI’s Asia 2025 study argues that vulnerabilities of Asian middle-income countries (MICs) differ markedly. Development partners, therefore, need to continue to support them with more and better aid, trade and investment, albeit in smart and changing ways.

Photo: Quay cranes on docks in Sri Lanka. Dominic Sansoni / World Bank. Licence: (CC BY-NC-ND 2.0)

Karishma Banga, Jamie Macleod and Max Mendez-Parra, April 2021

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The Heads of State and Government of the African Union in their decisions Assembly/AU/4(XXXIII) of 10 February 2020 and Ext/Assembly/AU/Decl.1(XII) of 5 January 2021 mandated negotiations for an E-commerce Protocol to the African Continental Free Trade Area and endorsed December 2021 as the deadline for its conclusion, respectively. This paper analyses digital trade provisions in existing South–South (S–S) trade agreements, with the aim of helping negotiators and policymakers from Africa better understand the practical policy implications behind typically existing and upcoming digital trade-related provisions. This can help guide the design of an effective E-commerce Protocol in the AfCFTA that facilitates inclusive development in Africa.

Digital trade involves products ordered digitally but delivered physically through online marketplaces (e.g. ordering a book from Amazon) as well as products that are wholly electronically delivered (e.g. buying an e-book) – that is, electronically transmitted or ET products. Digital trade provisions, for the purposes of this report, involve the rights and obligations in trade agreements that affect e-commerce. The African market is an important destination for the ET exports of African countries. South Africa, Mozambique, Kenya, Tanzania and Mauritius emerge as the top 5 African countries driving intra-African exports of potentially digitable products i.e. potential ET products, with South Africa accounting for 46% of total intra-African exports and 31% of intra-African ET imports. Some countries are highly dependent on intra-African trade for ET products; 70% of exports of digitable products by Rwanda, Mauritius, Namibia, Burundi, Togo, Zambia, Ghana, Zimbabwe and Eswatini are intra-African.

Photo: African Continental Free Trade Area. © African Union, , 2003. All rights reserved.

Sherillyn Raga and Dirk Willem te Velde, 25 February 2021

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The emerging picture of recovery from Covid-19 is that of inequality – in countries like Canada, each person has been allocated almost 5 sets of Covid-19 vaccines and $8,141 worth of government stimulus. In low-income countries (LICs) like Bangladesh, current vaccine orders only cover 14 in every 100 people, with announced fiscal stimulus equivalent to only $26 per capita The significantly higher level of public investment in sustainable green and digital sectors as part of Covid-19 recovery plans in advanced economies compared to LICs will further exacerbate divergent growth patterns.

This note discusses (1) the context of the poorest countries in terms of fiscal resources and access to vaccines; (2) the options for implementing fiscal measures that have higher multiplier effects in LIC contexts; and (3) the greater role for the G20 to promote a recovery that is inclusive of LICs.

Photo: Ongoing discussions in a previous G20 meeting. © G20 Website. CC BY-NC-ND 2.0.

Jodie Keane, Max Mendez-Parra, Phyllis Papadavid, Laetitia Pettinotti, Sherillyn Raga and Dirk Willem te Velde, February 2021

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Ensuring a healthy macro-economy is crucial for a high-quality recovery from Covid-19. Engineering appropriate stimulus packages, keeping a stable financial sector and reviving high value-added exports are core tasks of governments across the world as they also try to recover from the economic effects of the pandemic in 2020–2023. Unfortunately, the context in low-income settings looks more depressed because of lack of finance and more vulnerable economies.

Informing policy options for a better macro-economy in lower-income settings is a core task of an International Development Research Centre (IDRC)-funded project undertaken by the Overseas Development Institute (ODI) and five other think-tanks. This paper presents a methodology and a range of methods to provide quality research and analysis that can underpin such policy advice. The project aims to inform policy-makers in Bangladesh, Sri Lanka, Kenya, Peru and Tanzania on appropriate policies to address the Covid-19 recession and recovery over 2021–2023, with a focus on the interface between macroeconomic policies and economic, social (especially gender) and environmental outcomes.

Photo: Central Bank of Kenya. World Bank. Licence: (CC BY-NC-ND 2.0)

Karishma Banga and Dirk Willem te Velde, February 2021

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Digitalisation is changing the nature, content and modalities of trade, and Covid-19 has reinforced recent trends. A range of international trade events in 2021 could shape digital trade policy. E-commerce discussions will take place at upcoming Commonwealth Heads of Governments Meetings (CHOGMs) and the 12th World Trade Organization (WTO) Ministerial Conference (MC12).

The African Continental Free Trade Area (AfCFTA) should also bring forward discussions on e-commerce. In addition, the UK is signing and reviewing free trade agreements (FTAs) with a range of partners and will chair G7 discussions on trade, health and climate.

This note sets out key issues around the digital economy, trade and development, discusses the digital divide and presents ways the global trade community and bilateral players can facilitate inclusive digital trade.

Photo: Access to mobile phone in a fishing village in Nigeria. Arne Hoel / World Bank. Licence: (CC BY-NC-ND 2.0)

Sherillyn Raga and Dirk Willem te Veldde, January 2021

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The UK aims to be Africa’s partner of choice, by growing investment relationships to deliver more exports, jobs and economic growth that benefit both African and British businesses as well as to help African countries recover and build back from the Covid-19 pandemic. The recent second UK–Africa summit aimed to revive foreign direct investment (FDI) to African countries, in a context in which the pandemic has already led to sharp declines in overall FDI flows (-28%), mergers and acquisitions (-44%) and greenfield projects announcements (-66%) in Africa during the first half of 2020 alone.

This note aims to present the trends in UK FDI in Africa, how UK investors compare with other major investors (i.e. China and the US) in the continent and insights on constraints and recommendations to boost the role of UK in bringing quality FDI to Africa.

Photo: UK-Africa Investment summit. Graham Carlow/FCDO. Licence: (CC BY-NC-ND 2.0)

Max Mendez-Parra (Senior Research Fellow, ODI) and Dirk Willem te Velde (Principal Research Fellow, ODI)

8 January 2021

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A number of critical trade issues and trade policy events will make 2021 a significant year for trade policy-making, in the UK and globally. Decisions made this year will affect many lives in years to come, including in the poorest economies.

Several trade issues are currently right at the front of policy-making, including a trade-based recovery from Covid-19, digital trade and e-commerce, trade and the climate, a post-Brexit trade policy and Aid for Trade.

In 2021, the UK will make a number of decisions, for example about its own trade policy or trade preference scheme, and make commitments at international fora such as the World Trade Organization (WTO), the United Nations Framework Convention on Climate Change Conference of the Parties (UNFCCC/COP), the G7/G20 and the Commonwealth Heads of Government Meeting (CHOGM).

This note reviews key trade issues and international events to map out an ambitious trade for development policy agenda that goes beyond the trade continuity the UK was seeking post-Brexit.

Photo: A trading port in Tunisia. Dana Smillie / World Bank. CC BY-NC-ND 2.0

Jodie Keane, Laetitia Pettinotti and Maximiliano Mendez-Parra, December 2020

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If the European Union adopts BCAs unilaterally, this instrument is likely to be ineffective in bringing down global emissions in the most critical sectors. For example, most steel production is for domestic markets. BCAs efficiency is questionable compared to standards, if they do not reflect significant shifts in consumers’ choices. Even if developing countries – with historically low emissions – are excluded from BCAs they may still be affected through knock-on effects on complex supply chains.

Photo:The port in Tema, Ghana. Jonathan Ernst / World Bank. Licence: (CC BY-NC-ND 2.0)

Sherillyn Raga, November 2020

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The World Bank has introduced jobs and economic transformation (JET) as a core objective of the Eighteenth Replenishment of the International Development Association (IDA18). To monitor and measure the JET content in country partnership frameworks (CPFs), the World Bank (WB) has introduced four economic transformation indicators  in the IDA18 results measurement system (RMS). The IDA18 mid-term review (MTR) awarded six out of eight CPFs a transformation tag. The IDA Deputies and Borrowers call for a strengthened role of the JET special theme under the IDA19  and this offers scope to reflect on the appropriateness of these RMS indicators.

This paper assesses the extent to which economic transformation is prioritised in the recent CPFs of Benin, Burkina Faso, Guinea, Mauritania, Moldova, Nicaragua, Niger and Tanzania . It also reviews and provides suggestions on how the IDA18 RMS indicators on economic transformation might be improved. The analysis further includes a complementary examination of economic transformation content of active IDA project portfolios in Benin and Tanzania from 2015 to 2019. The project level analysis can also serve as an indicator of the WB effort in pushing the economic transformation theme through time, especially after the IDA18. The paper concludes by offering suggestions for how the WB can improve the focus of and reporting around IDA projects for economic transformation and job creation.

Photo: Women in Niger operating a processing unit to create products using local grains. Stephan Gladieu / World Bank. Licence: (CC BY-NC-ND 2.0)

Sherillyn Raga and Bouba Housseini, October 2020

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COVID-19 is taking its toll on Sub-Saharan Africa (SSA). To date, there have been 1.2 million infections and about 30,000 deaths on the continent. The pandemic has widely repressed mobility, disrupted economic production, decreased investment and remittance flows, created massive unemployment and pushed more people into poverty. Meanwhile, many governments increased spending in response to the health and economic crises but, given pre-existing vulnerabilities and limited fiscal space, compounded by an annual COVID-19 financing gap of $100 billion, policy-makers have been grappling with not only mobilising funds but also allocating limited resources to measures that will create the most impact. Utilising the ODI COVID-19 tracker, this note explores the evolution of SSA policy responses from the onset of the pandemic to the present, as well as recovery issues for policy-makers and stakeholders moving forward.

Photo: Empty streets in Nairobi as a result of Covid-19. World Bank/ Sambrian Mbaabu. Licence: (CC BY-NC-ND 2.0)

Ganeshan Wignaraja and Angela Hüttemann, October 2020

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This study analyses Sri Lanka’s transformation pathways, particularly the country’s shift from an agriculture-based society to a more industrial and services-based economy. It undertakes a granular exploration of economic transformation at a sectoral level in Sri Lanka from the late 1970s to 2019. It focuses on the garments sector within the industrial sector, and two services sectors – the tourism sector and the information and communications technology/business process management (ICT/BPM) sector.

The study adopts a common approach to analysing the transformation pathways of each sector over time by considering sectoral performance (including value addition, employment and exports), key enabling factors, policies and challenges. By looking at the long-term dynamics of specific sectors, it contributes to the literature on economic transformation in Sri Lanka.

Photo: Economic transformation in Sri Lanka.  Chamindu Perera/ Unsplash. Licence: (CC BY-NC-ND 2.0)

Karishma Banga, Adria Rius Rodriguez and Dirk Willem te Velde, September 2020

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Economic transformation is crucial to poverty reduction, through transforming production opportunities, lowering the costs and increasing the variety of consumption and enabling government services and other factors to provide better services. Digitalisation affects all of these channels in fundamental ways. This paper develops a framework to understand how. It argues that digitalisation can have positive and less positive or even negative effects in all of these channels but with likely overall net positive effects, sometimes large. It applies the framework to the cases of Kenya and Cambodia. It also argues that policy matters greatly for whether these positive effects materialise.

Digitally enabled economic transformation and poverty reduction: a framework

Economic transformation is brought about through productivity improvements by means of (i) structural changes – that is, movement of the labour force from less productive sectors of agriculture to manufacturing and services – or (ii) within-sector productivity shifts as a result of firms upgrading or firm entry/exit. It affects poverty reduction through three channels: production structures (the poor as producers), consumption of goods and services (the poor as consumers) and service delivery.

Digitally enabled economic transformation (DEET) affects poverty reduction under each of the channels. If managed well, DEET will reduce poverty, but digital technologies can also pose a threat and exacerbate existing inequalities and/or create new ones. How successfully these channels are able to reduce poverty will further depend on the enabling policy environment, comprising three sets of policies, related to building digital capabilities, fostering inclusive digital change and promoting competitiveness.

Photo: A woman attending to some seedlings on a farm in Kenya. Flore de Preneuf/ World Bank. Licence: (CC BY-NC-ND 2.0)

Jodie Keane, Laetitia Pettinotti and Maximiliano Mendez-Parra, September 2020

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The increase in global trade over recent decades through the expansion of production networks and the integration of newly industrialised economies within global value chains (GVCs) has contributed to unprecedented socioeconomic gains and reductions in poverty. But socioeconomic development’s reliance on fossil fuels has led to climate change and environmental damage, which ultimately leads to social and economic cost. The rise in global temperatures and associated impacts has and will continue to affect trade adversely. Trade within GVCs can be especially vulnerable as shocks can be transmitted instantaneously along supply chains, disproportionally affecting suppliers upstream in poorer countries.

Lockdown policies to limit the spread of Covid-19 may provide lessons for a global and simultaneous climate change impact: bringing to a standstill or drastically reducing supply through GVCs. While the global and sudden disruption the virus has caused is of a scale and immediacy that is greater than any currently experienced climate impact, there are nonetheless lessons to be learnt from the Covid-19-induced disruption for climate resilience, given projected abrupt changes in our climate.

Photo: Farmers sorting out tomatoes in Ethiopia. Stephan Bachenheimer / World Bank. Licence: (CC BY-NC-ND 2.0)

The essays in this volume have been written by Alberto Lemma, Jodie Keane, Max Mendez-Parra, Judith Tyson, Linda Calabrese and Dirk Willem te Velde.

Dirk Willem te Velde (editor), September 2020

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The UK Foreign & Commonwealth Office (FCO) and Department for International Development (DFID) merged into the Foreign, Commonwealth & Development Office (FCDO) on 2 September 2020, following an announcement to this effect in June 2020 by UK Prime Minister Boris Johnson. The government outlined the senior leadership in August 2020 but still needs to work out the precise ways in which the departments will be merged.

There has been much attention to the organisational issues around the merger. However, it is more important to consider the intended benefits of the merger in substance terms – which entail bringing foreign affairs and development interests closer together. One area in which the benefits could be large and visible is economic development, yet so far there has been little attention to the role of the FCDO as an economics ministry. This is perhaps surprising, as DFID is rightly proud of its recent experience in managing economic development programmes.

This set of essays considers areas in which the experience the FCO and DFID have gained can be bundled into economic policy under the FCDO. We consider a range of opportunities around aid, trade, investment and finance, focusing on the prosperity agenda, which includes support to job creation and economic transformation. Some ideas are new opportunities; some are enhancements of previous policies.

Photo:  Prime Minister Boris Johnson at the opening of the UK-Africa Invesment summit in London, January 2020. DFID/ Michael Hughes. Licence: (CC BY-NC-ND 2.0)

Aarti Krishnan, Karishma Banga and Joseph Feyertag, July 2020

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The growth of the platform economy, within agriculture, is increasingly becoming an important pathway to development. In the context of Sub-Saharan Africa, this is critical as, according to Cleland (2017), about 65% of the population relies on farming and about 20% on the non-agricultural informal sector; only around 15% are wage earners working in services and less than 3% are employed in industry. Agricultural digital platforms (such as farming apps) are driving e-commerce and the servicification of agriculture in developing regions. Côte d’Ivoire, Ghana, Kenya, Nigeria, Senegal, South Africa, Uganda and Zimbabwe have been described as hotspots for digital-tech solutions (GSMA, 2018). Of these, Ag-platforms, or farming apps, are some of the most common forms through which farmers have been ‘platformised’ in agricultural value chains. Our research paper on ‘AgriTech Disruptors in East Africa’ shows that, of a sample of 70 AgriTech innovative firms (e.g. Ag biotech, Precision Ag and robotics, innovative food and data-connected agriculture) in 2018 in the East African Community (EAC), between 66% and 86% of firms specialised in data-connected agriculture – that is, farming apps or providing enabling services for app development (Krishnan et al., 2020).

This report aims to discuss how various business models of Ag-platforms can be used to bridge national and regional policy gaps in East Africa, drawing on case study evidence from Uganda and Rwanda.

Photo: A farmer tilling the land on his farm. Peter Kapuscinski / World Bank. Licence: (CC BY-NC-ND 2.0)

Aarti Krishnan, Karishma Banga and Joseph Feyertag, July 2020

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This report aims to develop typologies of business models of the Ag-platforms that exist, identifying the challenges and opportunities of using these business models and the extent to which they can create value capture opportunities for farmers, youth and women in agriculture. These opportunities include Ag-productivity gains; value addition and diversification; creation of more, decent and formal jobs for youth; gender inclusion; knowledge accumulation; and absorptive capacity.

Drawing on case study evidence from Uganda and Rwanda, we deep-dive into the business models of Ag-platforms, unpacking the 3Cs of Costs, Complexity and Capabilities, to indicate the potential ways in which platformisation may exacerbate existing inequalities rather than supporting value creation for the poorest. Ultimately, we develop a roadmap for policy-makers to facilitate the development and proliferation of sustainable Ag-platforms.

Photo: Young women working on a cotton farm. Yosef Hadar / World Bank. Licence: (CC BY-NC-ND 2.0)

Laetitia Pettinotti,  Jodie Keane and Maximiliano Mendez-Parra, July 2020

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Climate, development and trade need to be articulated together for fair and efficient outcomes for all nations. Improved trade policies that work for climate and development require strengthened international governance, as well as regional and domestic alignment. The ClimXTrade Discussion series seeks to identify how to secure climate-compatible trade for development, with triple wins for trade, development and the climate, ahead of COP26.

Photo: Promotion of Green technology – Integrated Combined Cycle Thermo-Solar Power. Dana Smillie / World Bank. CC BY-NC-ND 2.0

Dirk Willem te Velde, Ouch Chandarany , Hiev Hokkheang, Yang Monyoudom, Tim Kelsall, Alberto Lemma, Aarti Krishnan, Karishma Banga, Astrid Broden, Michelle Nourrice and Jessica Evans, July 2020.

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Cambodia’s digital transformation is gathering pace but with different results and prospects across different groups in the economy. Mobile phone and social media use has grown rapidly. New apps are being developed, tested and implemented frequently. There is a budding digital start-up sector. And new sectors with new job opportunities based on digital technology are emerging.

Such positive developments are helping Cambodia advance significantly in economic and social terms. But there is another side, and that is the uneven impacts. While business and financial services have implemented more digital apps, the agriculture sector, which remains the main source of employment, is catching up more slowly through blockchain or precision agriculture. The tourism sector, a major source of forex, has untapped opportunities, and, crucially, the manufacturing sector, which is a major source of female employment and foreign exchange, will be highly vulnerable unless it embraces innovation and digitalisation more fully. Further, digitalisation within the public sector is lagging behind that in the private sector.

The Royal Government of Cambodia is preparing a long-term policy framework for the digital economy. Over the past year, ODI and CDRI have supported this process using analysis, case studies, interviews and a set of round tables including with the Governments’ digital economy task force. This study highlights the potentially significant distributional effects of digitalisation, and presents five policy suggestions to make the digital economy work for inclusive development..

Photo: Digital transformation inclusion in trade in Cambodia Chhor Sokunthea / World Bank . Licence: (CC BY-NC-ND 2.0)

Karishma Banga and Dirk Willem te Velde, July 2020

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Cambodia has one of the lowest numbers of coronavirus cases in the world, but it is facing amongst the world’s highest economic losses in the wake of the COVID-19 crisis. The IMF expects incomes to contract by 1.6% in 2020 in the baseline scenario due to major disruptions in tourism, garments and construction. Some sectors are expected to fare better, such as the information and communication technology and e-commerce, but these industries need to be nurtured more actively and the opportunities need to be made more inclusive if they are to be a significant base for a prosperous and more inclusive recovery.

The Royal Government of Cambodia is preparing a long-term policy framework for the digital economy. Over the past year, ODI and CDRI have supported this process using analysis, case studies, interviews and a set of round tables including with the Governments’ digital economy task force. The current study argues that policy framework needs to harness the digital economy and also target closing the digital divide by boosting an inclusive digital transformation in the wake of economic losses from COVID-19. To leverage digital industries in the COVID-19 recovery, we lay out a seven-point plan for inclusive digital transformation:

1. Radically transform innovation in the manufacturing sector;
2. Provide appropriate and quality skills for the future;
3. Nurture the digital start-up economy for an inclusive economy;
4. Protect and enable the most vulnerable groups to take part in the digital economy
5. Ensure a public sector that leads by example;
6. Digitalise trade facilitation and boost e-commerce; and
7. Revise and extend social protection mechanisms to vulnerable groups.

Photo:  A telecommunications tower in the Kandal province, Cambodia. AChhor Sokunthea / World Bank. Licence: (CC BY-NC-ND 2.0)

Phyllis Papadavid and Dirk Willem te Velde, May 2020

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The cost of COVID-19 for Africa is considerable. The IMF, the World Bank, UNECA and ODI all forecast economic costs of at least 5% of GDP in 2020. More than 20 million jobs will be lost. Foreign portfolio flows are fast receding; remittances and FDI are slowing considerably. African countries will not only see a contraction in economic activity but also resurgence in financial instability, driven in part by the need for (and in some cases the shortfall in) liquidity and monetary stimulus.

An EABC survey suggests major reduction in cash flow in East Africa varying by sector: tourism (92%), logistics (75%), retail and real estate (60%), financial (50%) and other sectors (25–50%). In April 2020, in Kenya, the seven largest banks restructured loans worth KSh 176 billion or 6.2% of the industry’s total gross loan book, including tourism (31%), real estate (17.2%), building and construction (17%) and trade (12.4%). The share of non-performing loans (NPLs) in the total loan book rose to a high 12.7% in February 2020 from 12% in December 2019. Defaults are growing in the manufacturing, energy and household sectors. The NPL ratio is above a five-year average of 8.2%, meaning that banks are cautious of new lending.

Photo: Workers at the Akuapem Rural Bank in Mamfe, Ghana. Jonathan Ernst / World Bank Licence: (CC BY-NC-ND 2.0)

Sherillyn Raga and Dirk Willem te Velde, May 2020

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The confirmed number of coronavirus cases reached 3.5 million on 4 May, affecting 187 countries. The global economy is projected to contract by 3% (or 5% less than was forecast only four months ago). World trade may fall by up to 32%. The African region may witness its first recession since the 1970s.

The financing gaps in poorer countries have increased and, as these countries cannot afford a stimulus, they turn to donors. Already by 3 April, more than 90 countries had requested support from the IMF. This note provides an overview of donor responses since the outbreak, financial instruments, the regional coverage of funding and country allocations.

Photo: World Bank Group President in a press conference with the IMF Managing Director to address the economic challenges posed by coronavirus.. World Bank / Simone D. McCourtie. Licence: (CC BY-NC-ND 2.0)

Lorena Alcázar Valdivia, Debapriya Bhattacharya, Andrea Ordóñez, Tausi Kida, Dirk Willem te Velde, April 2020

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COVID-19 reached the poorest countries with a time lag but now they are facing multiple shocks. Commodity prices, especially oil prices, have fallen steeply, global demand for their products has gone down sharply, tourism receipts have reduced markedly and retail outlets and restaurants are closed, leading to massive global supply chain problems. In addition, the coronavirus has now reached most countries, resulting in lockdowns in developing countries, leading to a further slowdown (some estimate by 2–3% of annual GDP each month). While countries around the world, primarily developed ones, plan for stimulus packages to confront the crisis, many developing countries lack the fiscal space to implement such measures.

Developing countries face additional constraints owing to the level of informality, poverty and refugee numbers. Most poor people cannot afford not to try to engage in economic activities, as they will face starvation otherwise. The poor are often the least resilient to shocks, and if they lose urban jobs they will need to return to rural areas. There are heightened fears of the coronavirus reaching refugee camps. The coronavirus shock will thus hit the poor hardest. Estimates suggest the number of malnourished and acute hungry will double by the end of this year, from 800 million to 1.6 billion and from 130 million to some 260 million, respectively.

Photo: Covid-19 testing. World Bank / Henitsoa Rafalia. Licence: (CC BY-NC-ND 2.0)

Deodat Maharaj, April 2020

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The COVID-19 pandemic is once more providing eloquent testimony on the vulnerability of the Caribbean to shocks, affecting every single economy in the region and trading partners. It is exposing acute economic vulnerabilities in Caribbean economies and requires both a coordinated response to deal with immediate effects and a need to tackle systemic issues related to the international trade and finance architecture.

The Caribbean region is among the most vulnerable on the planet to shocks, including those associated with natural disasters and climate change. This is because of its high concentration on a limited number of export sectors to drive growth. The region is arguably the most tourism-dependent of the globe and will see massive losses in this sector, affecting millions of lives and livelihoods. This comes after a stellar performance last year, with 31.5 million stay-over arrivals (half of them from the US). The drastic reduction in tourism will have a major adverse impact, not just on big business but also on taxi drivers, small shop owners, artistes, small-scale suppliers to hotels and the hundreds of thousands who work in hotels across the Caribbean. There is a risk of a greater number of Caribbean people falling into poverty.

Impacts of hurricane Maria in Dominica. Tanya Holden/DFID. Licence: (CC BY-NC-ND 2.0)

Karishma Banga, April 2020

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As of 20th April 2020, there are 281 COVID-19 cases in Kenya, and there have been 14 deaths. A number of measures are in place to reduce the spread of the virus, including suspension of air travel (except cargo flights), closing of borders, curfew and asking businesses to work from home. ODI’s report on Economic Vulnerabilities to Health Pandemics puts Kenya in the top seven low- and middle-income countries most vulnerable to direct adverse economic losses owing to COVID-19 outbreak; its main exports – horticulture and tourism – are very elastic in demand. Shutdowns in China, the US and Europe, notably in the apparel, machinery and footwear subsectors, are hitting manufacturing global value chains, with traditional sectors in Kenya such as the cut flower industry also take a beating. The services sector, which is the biggest contributor to economic growth in Kenya, is directly affected in terms of reduced income and employment. Overall, services contributed roughly 3 percentage points to an estimated 5.6% GDP growth in 2019.

Photo: Increased use of ICT during the coronavirus pandemic. Simone D. McCourtie / World Bank. Licence: (CC BY-NC-ND 2.0)

Max Mendez- Parra, April 2020

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Management of the COVID-19 pandemic is generating an unprecedented economic crisis. The depth of the crisis remains to be seen but it is by far one of the sharpest ever recorded. All countries are simultaneously being affected, with no one country able to provide any countercyclical demand.

Trade has plummeted, a result of the fall in economic activity, travel bans and lockdowns. The WTO forecasts a fall in global trade of between 13% and 32% in 2020. The fall in commodity prices paints a very dramatic picture of the effect on exports from developing countries; where export of services are also likely to be impacted.

Many countries are exacerbating the situation created by fall in trade by restricting exports of certain items (medical supplies, protective equipment, drugs) with the aim of supporting local efforts to address the pandemic. In this context, countries are adopting controversial and, in some cases, unsuitable measures to address the emergency. Such responses may be ineffective, inefficient and damaging to other countries’ responses.

Photo: International Airport in Kathmandu, Nepal during the coronavirus crisis. Narendra Shrestha/ Asian Development Bank. Licence: (CC BY-NC-ND 2.0)

 Stephen Gelb, Jodie Keane, Max Mendez-Parra and Dirk Willem te Velde, April 2020

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With most of the world currently under lockdown, it is very challenging to keep critical supply chains open. When the coronavirus emerged in China, it shut down many supply chains, affecting electronics, garments and other products. And when the rest of the world also went under lockdown, in Europe and the US many retailers shut, leading to massive declines in consumer demand. Retailers and well-known brands have cancelled orders of garments from their supplier factories in many developing countries. Some have refused to pay suppliers for orders placed, and in some cases do not even pay for work already completed under existing orders but not yet shipped, although some, like H&M and M&S, have treated factories and workers in supply chains a little better. Cancellations by European brands have badly damaged countries such as Bangladesh dependent on garment and footwear exports. There are also global shortages of essential goods, in particular personal protective equipment (PPE). Getting access to ventilators, hand sanitisers, masks and gowns is critical to health and care workers’ safety. Consumers globally have also witnessed empty shelves in supermarkets and major disruptions to food supplies.

Photo: The use of hand sanitiser as a precautionary measure against coronavirus. World Bank / Ousmane Traore. Licence: (CC BY-NC-ND 2.0)