The evolving fiscal and liquidity stimulus packages in response to COVID-19 in Sub-Saharan Africa

Huge size disparities in economic stimulus packages persist between G20 (27% of GDP) and SSA (3% of GDP) countries.
The financing of COVID-19 responses in SSA has evolved over time from accommodative monetary policy at the onset of the pandemic to more fiscal support measures but policy space remains very limited.
The IMF and World Bank are providing funding to COVID-19 the economic policy response in most SSA countries but this so far falls short of what is needed.
Given significant existing funding gaps and limited fiscal space, COVID-19 stimulus packages in SSA are mostly supporting immediate short-term responses to the crisis; funding for long-term ‘building back better’ recovery measures is elusive.
‘Smarter’ economic and social policies are needed to mitigate the impacts of the crisis and promote an inclusive and sustainable recovery.

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)

Assessing Sri Lanka’s economic transformation pathways, 1977-2019

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.

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)

Digitally enabled economic transformation and poverty reduction: Evidence from Kenya and Cambodia

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.

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)

Enhancing the resilience of global value chains to climate change: lessons from Covid-19

Climate shocks often translate into trade shocks for countries. Building resilience – the capacity to cope with crises – within different types of global value chains (GVCs) is essential to sustain and support socioeconomic development and welfare gains.
Resilience to trade shocks within GVCs comes from stock management and just-in-time strategies as well as investing in trading relations and supporting export diversification.
While promotion of the shortening and reshoring of GVCs can score short-term political gains, it risks increasing economic and climate vulnerability, with mixed evidence on climate mitigation gains.

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)

Promoting prosperity: Ten opportunities on economic development for the new Foreign, Commonwealth and Development Office

The recent merger of the FCO and DFID into the FCDO provides a range of opportunities in the area of economic development.

We list 10 opportunities:

1. Publish a coherent UK-Africa strategy
2. Co-ordinate an effective import policy for national security
3. Promote resilient value chains
4. Incentivise the City of London for development
5. Promote UK outward investment to poor countries
6. Make a step change in business partnerships
7. Transform UK development finance
8. Support job creation and economic transformation for self-reliance
9. Using aid to provide global public goods in middle-income countries
10. Liaise with China

Each presents an opportunity from a trade or investment angle for both the UK and developing counties. However, there is also a risk that economic development may not feature prominently in the new FCDO, whose organogram has matrix management across several themes and geographies.

FCDO management will need to ensure the economic development agenda in the above 10 points land well in the upcoming discussions.

 

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)

AG-Platforms in East Africa: National and regional policy gaps

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).

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)

 

Platforms in agricultural value chains: emergence of new business models

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.

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)

Securing climate-compatible trade for development

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.

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

Sherillyn Raga (ODI) |Halted economic transformation as a consequence of coronavirus: evidence and implications from employment data in the Philippines

The lockdown in the Philippines not only led to the loss of millions of jobs but also pushed those who remained employed towards lower-productivity agriculture and informal sector work. To preserve the existing skills necessary for economic transformation, the government and its partners need to make a conscious effort to ensure that those who have been laid off in high-productivity sectors such as manufacturing can return to previous or similar employment. Moving forward, it is continued public investment in higher-level education that will increase job security, ensuring the economy is more resilient in similar crises in the future.
This blog examines disaggregated sectoral employment data in the Philippines through the lens of economic transformation, which has implications for the Philippines’ medium- to long-term economic growth, and which may be of relevance to other low- and middle-income countries.

Sherillyn Raga (Senior Research Officer, ODI)

8 July 2020

The lockdown in the Philippines not only led to the loss of millions of jobs but also pushed those who remained employed towards lower-productivity agriculture and informal sector work. To preserve the existing skills necessary for economic transformation, the government and its partners need to make a conscious effort to ensure that those who have been laid off in high-productivity sectors such as manufacturing can return to previous or similar employment. Moving forward, it is continued public investment in higher-level education that will increase job security, ensuring the economy is more resilient in similar crises in the future.

As of April 2020, the unemployment rate in the Philippines was at a record high of 17.7%, accounting for 7.3 million Filipinos. Labour force participation among those aged 15 years and older had declined to a historic low of 55.6%, and average hours per week had dropped to 35 hours from 41.8 in April 2019. Among those employed, more than a third (38%) were not at work, and a third (32%) were in part-time employment. This negative impact on aggregate employment indicators highlights the consequences of the economic and labour market shutdown following the lockdown implemented from 13 March to 15 May 2020.

This blog examines disaggregated sectoral employment data in the Philippines through the lens of economic transformation, which has implications for the Philippines’ medium- to long-term economic growth, and which may be of relevance to other low- and middle-income countries. The IMF and World Bank Development Committee defines economic transformation as a ‘shifting from lower to higher productivity activities, within and across firms, from rural to urban areas, and from self- to wage-employment’. The impact of the coronavirus on the Philippines’ economic transformation is now evident in the shift in the employment share towards agriculture, the informal sector, less skilled occupations and rural employment.

The latest employment data from the Philippines show that a larger share of workers has been pushed towards agriculture and the informal sector. The agriculture sector’s share in total employment had increased by more than 4 percentage points to 26% in April 2020 from 22% in April 2019, while the shares of industry and services had declined by 2 percentage points, to 17% and 57%, respectively. Within the industry sector, the combined share of employment in manufacturing and construction in total employment had fallen by more than 2 percentage points, with 2.3 million fewer workers in these sectors during the month compared with pre-COVID-19 April 2019.

The share of relatively high-skilled professions has declined. While the lockdown has negatively affected the number of employees in all types of occupation, the share in total employment of those employed as managers, technicians,  associate professionals (e.g., bookkeepers, interior designers, medical  representatives, human resource and marketing assistants), plant and machine operators and assemblers, and services and sales workers has declined compared with April 2019. Meanwhile, the share of workers engaged in relatively low-productivity jobs such as elementary occupations and skilled agricultural, forestry and fishery work has increased by 1.5 and 2.6 percentage points, respectively.

Wage and salary workers in the private sector have been more affected during the lockdown. By class of worker, the share in total employment of jobs with a relatively stable income in the private sector had fallen by 2.4 percentage points to 47.9% in April 2020 from 50.2%, indicating a decline of 4.8 million workers in private establishments during the month compared with April 2019. Meanwhile, the share of wage workers in households and self-employed and unpaid family workers in total employment had gone up by 2 percentage points in April 2020 compared to same month last year.

Most of the unemployed during the lockdown are those without or with a low level of educational attainment, highlighting the need for upskilling to increase job security in times of crisis. The share in total unemployment during the lockdown in April of those with no educational grade completed or who have obtained only elementary and junior high school education had risen by 12 percentage points to 64% compared with April 2019. Notably, those who have obtained senior high school to graduate education have witnessed a fall in unemployment in terms of share and absolute number.

Unemployment has been more prevalent in rural areas during the pandemic, reflecting fragility of rural employment. The national unemployment rate as of April 2020 is 17.7%, but the rate is lower in Metro Manila (capital), at 12%, and higher outside the capital (average across regions), at 19%. In contrast, last April 2019, Metro Manila had a relatively higher share of unemployment (6.3%) than did the non-capital regions (4.8%).

The developments above suggest three policy implications:

First, in times of pandemic and imposed lockdown, private sector employees suffer the most and workers are pushed towards lower-productivity jobs and the informal sector. It is of the utmost urgency to alleviate the impact of COVID-19 on the poorest segment of the country. However, it is likewise critical that the government, in cooperation with the private sector and potentially development banks, assist businesses to bounce back and ensure that those who have been laid off in high-productivity sectors who already possess the necessary job skills can return to previous or similar employment.

Second, while we are witnessing a shift in employment from a decreased share in high-skilled professions towards an increased share in relatively less skilled occupations, it seems that those with a higher level of education are less likely to be unemployed in pandemic crisis times. This emphasises the importance of continued public investment in higher education to increase job security at the individual level and to sustain the contribution of this (e.g. through continued income tax if more educated workers are retained even under a lockdown period) to national revenues, making the economy as a whole more resilient in similar crises in the future. This is especially relevant for the currently weak educational quality in the country, as indicated by its bottom ranking in terms of 15-year-old students’ reading comprehension and expenditure per student relative to other 79 countries.

Third, higher unemployment outside the capital reflects the twin problem of concentrated opportunities in the capital and low and/or fragile job opportunities outside Metro Manila. Urbanisation is generally associated with faster economic transformation as resources (labour and capital) move from lower-productivity farm to higher-productivity non-farm activities, as well as with agglomeration benefits. Thus, the government’s Balik Probinsya, Balik Pag-asa (‘Return to Provinces, Return Hope’) programme, which aims to decongest cities and encourage people to relocate to their provinces during this pandemic, may work against the country’s economic transformation, given that the provinces are largely agricultural and do not have the infrastructure, high-productivity sectors and job opportunities (yet) to absorb labour supply from the city.

Photo: Farmer scattering rice grains in a rice field in Sta. Cruz, Laguna, Philippine. Danilo Pinzon / World Bank. CC BY-NC-ND 2.0

Karishma Banga and Dirk Willem te Velde (ODI) | Seven ways to harness Cambodia’s digital sector in the recovery from COVID-19

Cambodia has one of the lowest numbers of coronavirus cases in the world but it is facing among 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 as a consequence of major disruptions in tourism, garments and construction. Some sectors are expected to fare better, such as information and communication technology (ICT) 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.

Karishma Banga (Research Fellow, ODI ) and Dirk Willem te Velde (Principal Research Fellow, ODI)

7 July 2020

Cambodia has one of the lowest numbers of coronavirus cases in the world but it is facing among 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 as a consequence of major disruptions in tourism, garments and construction. Some sectors are expected to fare better, such as information and communication technology (ICT) 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 (supported by the Australian government) using analysis, case studies, a background report, interviews and a set of roundtables, including with the government’s digital economy task force. A new study aims to inform this process by providing a range of policy suggestions for the policy framework, which has taken on increased significance in the context of COVID-19.

COVID-19 has had a major impact on Cambodia, through the channels of manufacturing and services. Emerging evidence highlights the negative economic impact of the pandemic on tourism, construction and business services, with fewer impacts on insurance, financial, telecoms and computer-related services. Revenue at Angkor Wat (a major source of tourism revenues) fell by an astonishing 99.5% at the start of the crisis. Within manufacturing, garment exports have been particularly hit, owing to falling demand from retailers in Europe and the US coupled with reduced access to inputs from China. The Garment Manufacturing Association in Cambodia has reported the suspension of operations by many garment factories. More than 150,000 workers were suspended in May without any clear indication on whether or when work would resume. The withdrawal of Cambodia from the Everything But Arms initiative may further affect Cambodian exports to the EU.

However, a range of services industries could help mitigate the impact of the economic crisis:

  1. Communication and audio-visual services, including digital animation: Cambodia has a small number of interesting high-quality providers of animation services.
  2. IT-enabled business process outsourcing (BPO) services: Cambodia’s IT industry is located in the BPO segment, offering services to international clients, such as in data processing, data analysis, document processing and non-voice call centres (e.g. chat services or IT support).
  3. Post and telecoms for e-commerce: Cambodia has the highest internet connectivity growth in the Asia-Pacific region and a very young population, which allowed most e-commerce ventures to reach a clientele of 15,000 consumers in 2017. E-commerce has enabled Cambodia to diversify its export basket of manufacturing products. Given cargo delays and border closures during the pandemic, it is important for Cambodia to leverage domestic platforms, such as Tinh Tinh. This may enable greater micro, small and medium-size enterprise (MSME) participation in e-commerce platforms, which has otherwise been low as a result of the high cost of membership and the commission charged on third-party platforms.

The government’s long-term strategy for the digital economy for the decades ahead 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. Currently, there exists a multi-faceted digital divide in Cambodia; firms’ adoption of digital technologies is lower than comparator companies; business and financial services are more digitalised than other industries; internet access is mainly dominated by the 15-25 age group; and there exist specific gaps in the availability of digital skills. To leverage digital industries in the COVID-19 recovery, a report by ODI and CDRI lays the foundation (see summary here) for a seven-point plan for inclusive digital transformation:

1. Radically transform innovation in the manufacturing sector. In response to the crisis, there is a need to leverage digital technology and innovation to adapt existing local manufacturing capabilities in Cambodia towards much-needed medical equipment and personal protective equipment manufacturing for domestic consumption and export. The government needs to support manufacturers in changing current production lines towards production of essential goods to deal with the pandemic. A new incentives package (offering an ecosystem that encourages digital technology) can help attract technologically more intensive investment, encourage upgrading technology in factories and promote relevant skills, for example through an enhanced Skills Development Fund and targeted technical and vocational education and training placements. It could also embrace the concept of digital small and medium enterprise clusters.

2. Provide appropriate and good quality skills for the future. The pandemic is fuelling e-commerce growth in Cambodia, with the potential to create new employment opportunities. For instance, Grocerdel – an online start-up that delivers fresh farm produce in Phnom Penh – has seen its sales go up by over 165%, and has had to increase its staff intake by 50% to meet the spike in demand. Establishing and bringing new dynamism into the sector skills councils to embrace a digital economy would be a helpful, targeted measure. Skills development in the digital age requires supply-side policies on education and skills and demand-side policies on innovation and research and development, along with the facilitation of linkages between the supply and demand of skills through institutional intermediaries and complementary policies on technology transfer. There will also need to be more emphasis on education through digital means.

3. Nurture the digital start-up economy for an inclusive economy. The start-up economy in Cambodia is very dynamic but a challenge lies in seeking a better link between this and how it delivers for the poorest. Several organisations already support or invest in tech start-ups. New incentives by the government for collective action by start-ups could redirect some efforts to develop apps with relevant applications for the poorest. According to the Ministry of Commerce, the government has reduced the cost of registration by 40% to ease the burden of formalisation for start-ups (UNCTAD, 2020). The digital start-up economy will be essential to advancing Cambodia’s recovery from the fall-out of COVID-19.

4. Facilitate digital infrastructure development to enable the most vulnerable groups to take part in the digital economy. In response to the pandemic, businesses are increasingly shifting online, people are being asked to work from home and there has been a rise in e-commerce activities and digital work – all of which is placing pressure on existing digital infrastructure. Targeted policies are required for digital infrastructure development during the crisis. For instance, Cambodia has very low fixed-broadband penetration and low mobile broadband penetration compared with other Asian economies, and its market is currently dominated by low-quality residential broadband services. Targeted support is also required to ensure that those who lose out from new technologies in industries can take part elsewhere in the economy. This could take the form of rolling out digital infrastructure to those who need it most or raising digital literacy in vulnerable groupings.

China is an important player in Cambodia’s digital development plans; in March 2019, Cambodia signed an agreement with Chinese Huawei to develop 5G mobile network technology in the country. This was followed by an announcement in July of collaboration between Smart Axiata, Cambodia’s leading mobile telecommunications company, and Chinese Huawei in building the 5G network in Cambodia. Wuhan – the worst hit city in China by COVID-19 – is the world’s largest supplier of fibre optic cables. Therefore, development of digital infrastructure in Cambodia may itself be affected by the pandemic.

5. Ensure a public sector that leads by example. Digital leadership will be very important in the next few years as Cambodia manages its economic recovery after the pandemic. Managing the process towards a new framework for a digital economy in a coordinated way is essential. Currently, for instance, the government is finalising an e-commerce strategy for Cambodia with the support of the Enhanced Integrated Framework, involving various key ministries. Institutional strengthening inside the government around the digital economy, and securing a lead role of the Ministry of Economy and Finance, working with others such as the recently upgraded Ministry of Industry, Science, Technology and Innovation (MISTI) will be vital. It is also important for the government to progress on e-governance and electronic services by accelerating efforts towards adopting its e-Government Master Plan 2017–2022. E-government services can make it easier for consumers to pay their bills online and reduce evasion, coupled with better monitoring of tax collection. This can ultimately lead to increased government revenue, which can be spent on support to the poor, particularly during the pandemic.

6. Digitalise trade facilitation and boost e-commerce. All trade-related agencies must adopt and deploy the ICT system to simplify and automate their trade-related procedures, which will contribute towards building Cambodia’s economic resilience against pandemics, climate change and other challenges. Currently, there is an absence of coordinating institutional mechanisms, though some efforts are being made to leverage the digital economy for trade facilitation. E-commerce can help mitigate some of the economic losses that Cambodia faces in traditional sectors owing to the pandemic but inclusive recovery from the crisis will require targeted efforts to increase participation of MSMEs in the digital economy. This can be done by increasing their access to domestic and international digital platforms, addressing challenges pertaining to information asymmetry between platforms and sellers, providing training in digital skills, facilitating digital payment uptake and addressing issues around transport, logistics and delivery.  

7. Revise and extend social protection mechanisms to the most vulnerable, who are most at risk of losing their jobs owing to the pandemic. It is key to note that digital technologies can help improve the viability and efficacy of policy solutions, including those facilitating the extension of social protection. In the longer term, digital technologies can support an increasingly harmonised social protection system, which can facilitate better coordination across IDPoor, the National Social Security Fund and other cash transfer and social assistance programmes.

In conclusion, the Royal Government of Cambodia can facilitate to use the digital sector to recover from COVID-19. By following the sevens steps above, it can facilitate an inclusive digital transformation that can foster a more inclusive and resilient future.

Photo: Use of digital technology as key tool to facilitate an inclusive digital transformation to recover from COVID-19. Roxana Bravo / World Bank. CC BY-NC-ND 2.0.

Fostering an inclusive digital transformation in Cambodia

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.

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)

Fostering an inclusive digital transformation in Cambodia Summary Briefing

The Royal Government of Cambodia is developing a long-term strategic framework to support a digital economy. This centres on the following areas: digital infrastructure; digital human resources including technical, cognitive and soft skills; business ecosystems; e-government; and digital trustworthiness.
Cambodia’s digital transformation is gathering pace and can help Cambodia recover from the downturn. However, our analysis suggests there are different impacts and prospects among different groups and sectors. Managing the differential impacts of digitalisation will be crucial to maintain inclusiveness along the digital transformation path.
Cambodia should enhance the inclusiveness of its digital transformation by: (i) radically transforming innovation in the manufacturing sector; (ii) providing skills for the future; (iii) nurturing the digital start-up economy for an inclusive economy; (iv) protecting and enabling the most vulnerable groups; v) promoting a public sector that leads by example.

ODI and CDRI, July 2020

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Cambodia has advanced significantly towards the digital economy. The Royal Government of Cambodia (RGC) is developing a long-term strategic framework to support it. This move towards a digital economy cannot come soon enough for Cambodia. The current corona virus outbreak, threats to withdraw trade preferences, and a ban on online gambling have laid bare the fragility of Cambodia’s development success. Over the past few months, construction and gambling activities have tumbled, tourism has fallen sharply, and Cambodia’s garments face $100 million of additional duties in the EU after withdrawal of trade preferences in August 2020. Cambodia is looking for a broader base to transform and recover in an inclusive way from the coronavirus crisis.

Digital transformation is a promising area, but it does not automatically support all members of society to the same extent. Complementary measures that include skills development are critical to make digital transformation inclusive. This briefing discusses Cambodia’s digital profile and policies and examples of the current and expected distributional impacts of its digital transformation; and proposes a range of policy areas to enhance a more inclusive transformation.

Photo: Use of information technology and communications to promote digital transformation. Simone D. McCourti/ World Bank . Licence: (CC BY-NC-ND 2.0)

Cambodia, COVID-19 and inclusive digital transformation: a seven-point plan

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.

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)

June 2020| Negotiating and implementing investment policies in the AfCFTA – Online Capacity building event

Economic transformation is one of the main pillars of the African Union Agenda 2063. Increasing trade and investment in general and specifically amongst AU Member States is critical to achieve economic transformation and the African Continental Free Trade Area (AfCFTA) helps to achieve both goals.
Phase I of the negotiations finalised in late 2017 established protocols on the liberalisation of intra-African trade in goods and services as well as the Dispute Settlement Mechanism. Phase II, launched in early 2018 and to be concluded in early 2020, will be oriented towards including provisions on investment, competition policy and intellectual property rights. The increase of intra and extra-African investment in Africa is critical to developing and improving the productive capabilities required to raise productivity and create employment.

June 2020

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Economic transformation is one of the main pillars of the African Union Agenda 2063. Increasing trade and investment in general and specifically amongst AU Member States is critical to achieve economic transformation and the African Continental Free Trade Area (AfCFTA) helps to achieve both goals.

Phase I of the negotiations finalised in late 2017 established protocols on the liberalisation of intra-African trade in goods and services as well as the Dispute Settlement Mechanism. Phase II, launched in early 2018 and to be concluded in early 2020, will be oriented towards including provisions on investment, competition policy and intellectual property rights. The increase of intra and extra-African investment in Africa is critical to developing and improving the productive capabilities required to raise productivity and create employment.

The Capacity building exercise aims to address the range of investment development and treaty challenges for the African Union and its Member States, as well as build the negotiating capacities of Member States and the AUC. It is important to have an adequate understanding of the links between the proliferation of bilateral investment treaties, exiting investment protocols within the Regional Economic Communities (RECs) and the negotiations on investment in AfCFTA.

The investment capacity building training was conducted using Zoom virtual platform. The training took place over four days (16th, 17th, 23rd and 24th June) and saw the participation of over 190 participants from AU member states, regional economic communities (RECs) such as COMESA, EAC, ECOWAS, SADC among others, and international partners such as AFDB and GFA. Participants were provided with training materials translated into Arabic, French and Portuguese to ensure good preparation prior to the event.

The training was facilitated by experts from ODI, AUC, African Trade Policy Centre – UNECA, International Institute for Sustainable Development (IISD) and Columbia Centre on Sustainable Development (CCSI) and covered a range of topics relating to investment and the AfCFTA.

Photo: Opening ceremony of the online training, with officials from ODI, African Union Commission and the AfCFTA Secretariat. Overseas Development Institute.

Jodie Keane (ODI)| Enhancing resilience within global value chains: the implications of COVID-19 for climate change adaptation and mitigation policies

The increase in global trade in recent decades, through the expansion of production networks and the integration of newly industrialised economies within global value chains (GVCs), has contributed to unprecedented reductions in poverty and historically unparalleled socioeconomic progress. However, severe environmental costs, and other losers within specific industries, have accompanied these socioeconomic gains. Even without consideration of climate change, the coronavirus crisis has laid bare the fragility of global supply chains and of the nature of relationships with suppliers in poorer countries. With a few lead firms (buyers and traders) typically controlling access to end markets, suppliers have reduced market power, which limits their capacity to adapt to demand shocks. Reduced inventory management as a result of just-in-time delivery has presented visceral limitations during the coronavirus pandemic.

Jodie Keane (Senior Research Fellow, ODI)

20 May 2020

The increase in global trade in recent decades, through the expansion of production networks and the integration of newly industrialised economies within global value chains (GVCs), has contributed to unprecedented reductions in poverty and historically unparalleled socioeconomic progress. However, severe environmental costs, and other losers within specific industries, have accompanied these socioeconomic gains. Even without consideration of climate change, the coronavirus crisis has laid bare the fragility of global supply chains and of the nature of relationships with suppliers in poorer countries. With a few lead firms (buyers and traders) typically controlling access to end markets, suppliers have reduced market power, which limits their capacity to adapt to demand shocks. Reduced inventory management as a result of just-in-time delivery has presented visceral limitations during the coronavirus pandemic.

In view of the vulnerabilities exposed – such as shortages, the inability to source relevant equipment, imposed export restrictions and so on – many policy-makers are adapting trade policy to emphasise ‘resilience’. Within this debate, although diversification is a recognised means to reduce risks, it comes at a cost. Hence, inducing domestic production in selected sectors is now being advocated as a form of ‘strategic autonomy’; calls to regain industrial sovereignty are getting louder. The shortening of GVCs, either reducing the contribution of foreign value added or decreasing the number of stages of production, could accelerate if policy matches the rhetoric of policy-makers (e.g. subsidies to bring production back home).

As policy-makers seek to enhance resilience by reducing dependence on external suppliers, there are risks that poor countries will lose access to markets that provide vital footholds out of poverty. Coupled with the effects of climate change, the post-COVID-19 trade landscape could become even more challenging for poor countries to navigate. This blog discusses the implications of the COVID-19 crisis in relation to trade within GVCs given the looming climate change crisis, focusing on the following questions: How can resilience within GVCs be enhanced? What can we learn from the current disruption, to enhance the climate resilience of GVCs? What are the implications of the shortening of GVCs for climate change adaptation and mitigation efforts?  

Building resilience within GVCs: where do you start?

Diversification of supply sources requires deeper and wider production networks, including at the regional and domestic levels. Lead firms typically make decisions in this regard based on the nature of the technology involved, the ability to codify information and producer capabilities, as well as on issues such as contract enforcement capacity, comparative costs of production and so on. While some developed countries are seeking to reduce their dependence on a single source country, in view of the implications of COVID-19, developing country suppliers typically struggle with the power dynamics inherent within those GVCs driven by one or a few buyers. What has been alarmingly exposed during this global pandemic is just how fragile these relationships are: some of the poorest countries in the world have been battling with multinational firms to ensure contracts are fulfilled and payment is made for goods produced and already in transit.

Developed countries taking back control of stages of GVCs in order to enhance resilience may further accentuate these power asymmetries, which could increase the risks for developing country suppliers in view of future shocks, including climatic shocks. For many developing countries, enhancing resilience means not only confronting the severe economic vulnerabilities that arise as a result of a lack of export diversification and dependence on a few firms to access end markets, but also adapting now to an increasing susceptibility to environmental shocks.

Globally, it is now recognised that these shocks are increasing as temperatures rise. Overnight, productive structures can be, and have been, wiped out. Given weak infrastructure, the costs of trade are rising, which is negatively compounding efforts to diversify economically. These aspects of persistent economic vulnerability for least developed countries and small vulnerable economies will worsen unless efforts to ramp up Nationally Determined Contributions to emissions reductions are secured at the forthcoming COP26 – postponed to early 2021.

While diversifying and solidifying GVCs in some sectors, including strategic stockpiling where necessary, forms part of the move towards building resilience in the developed world, many developing country producers lack the economic clout to achieve similar objectives. Despite the stalemate at the WTO (as well as challenges in view of the recent resignation of the WTO DG), it is imperative that members charged with the obligation to secure open and resilient value chains consider how best to achieve this in an inclusive and sustainable way. Just as firms have disclosed their COVID-19 risks, now is the time to get real about climate risks.  

What are the implications of the shortening of GVCs for climate change policy?

Notwithstanding the economics of the debate, re-shoring of specific GVC activities by countries that are committed to the Paris Agreement must now be undertaken within a carbon budget. Emissions trading schemes were designed because undertaking emissions reductions and associated costs are cheaper in developing than in developed countries; it is also typically cheaper for production to take place in developing countries, and the recycling of comparative advantages provides a vital foothold out of poverty, if successfully managed.

The reasons for supply chains becoming more domestic rather than more regional – with an estimated ‘erosion’ in globalisation (i.e. a reduction in the average length of supply chains since 2012) of 52 km per year – may be either structural, related to the digital transformation or a result of production becoming closer to consumers. These trends can contribute to emissions reductions, for example through reduced transportation (using subsidised fuel). COVID-19 is surely accelerating trends towards the increased use of digital technology, which can assist in the reduction of carbon emissions. But until our sources of energy change dramatically towards more renewable forms, these trends could be a lose–lose for development and trade and carbon emissions reductions; more evidence is needed to assess the overall implications of movement towards shorter GVCs.

Concluding remarks

This year was meant to see achievement of a multilateral trade deal and enhanced commitments to limit anthropogenic climate change. Instead, we have experienced the steepest decline in both global trade and emissions of modern times. Decisions on trade and climate have been delayed while more immediate action has been sought on securing the finance to react to the global pandemic; major accomplishments have been achieved regarding international collaboration to develop a vaccine; some of the poorest in the world have secured debt forgiveness. Some WTO members have announced important increases in Aid for Trade resources to help poor countries adapt to the trade shocks unleashed.

But the provision of support to firms adapting to COVID-19 in the developed and developing world must heed the warnings regarding the next environmental crises. Firms will be forced by their shareholders and rating agencies to think about the resilience of their GVCs, as well as by governments and consumers to reduce associated carbon emissions. Support to firms should now entail provisions to enhance their environmental resilience. The current crisis has provided the global economy community with more opportunity to get the right frameworks in place ahead of COP26 and as we enter this last decade of action for the advancement of the 2030 Agenda.

Photo: Carbon emissions from factories. John Hogg/World Bank. CC BY-NC-ND 2.0

Monetary policy and financial stability in Africa during COVID-19.

African countries will not only see a contraction in economic activity, but also a likely resurgence in financial instability. African central banks have lowered interest rates and reserve rations, bought government bonds, and provided additional liquidity, but in some countries, there are now limits to more action (e.g. lower interest rates).
Ensuring both financial stability and increased economic activity in Africa needs careful monitoring and additional steps.

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)

Dirk Willem te Velde (ODI) | Using high frequency data to monitor the economic impacts of crises

Dirk Willem te Velde (Principal Research Fellow, ODI)

18 May 2020

A multitude of trackers cover policy responses to COVID-19 but when it comes to up-to-date monitoring of actual social and economic impacts there appears to be a gap. Impact data are not collected systematically and in a comprehensive manner. Obtaining access to reliable, good quality statistical data for the poorest countries is a challenge; it is even more difficult to monitor economic data in real time or at high frequency and with a short time lag.

ODI has monitored a range of macroeconomic crises (e.g. the global financial crisis, the Eurozone crisis and crises related to oil prices and food price hikes) using economic data. This work provides lessons with regard to what high frequency data can be used to monitor the impacts of COVID-19 globally, and specifically those on the poorest countries.

The table below presents data sources in the following areas:

  • Commodity prices, food prices and hunger;
  • Global and bilateral trade, trade costs and mobility;
  • Capital markets, finance flows and fiscal and monetary statistics; and
  • Employment and production.

High frequency data are published daily, weekly, monthly or quarterly. Some are available immediately; some come with a time lag of a few days or weeks; yet others take several months to become available. Some data include noise (rather than signal) and much variability; others are cleaned, adjusted for variability or more robust. Some data are publicly available (we focus mostly on these); others are available behind a paywall.

So far, data for commodity and food prices appear to be covered well, perhaps in part because the G20 has paid attention to monitoring these for several years. Trade data are also available but with a time lag. Data on capital markets and finance flows are available but patchy, and often behind paywalls for use by investors. High frequency data on employment and production tend to be weakest: they are not available for a few months and there are well-known challenges with such data.

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Commodity prices, food prices and hunger
   Source and frequencyComments on useHyperlinks and examples
Commodity prices (global prices)Available immediately (e.g. FT for oil/copper prices; IMF/WB weekly/monthly averages with a short time lag (a few weeks)Variable reflecting many issues such as supply/demand and othersOil price (paywall)  

IMF  

World Bank Price data (pink sheet)  

GroAgro
Food prices (domestic prices)FAO food prices, monthly (a week time lag)   IFPRI’s Food Price Monitor covers daily price data for domestic markets in India, Rwanda, Uganda and Burundi   National statistics officesLocalised data patchyFAO food price index  

IFPRI dashboard
HungerWFP, number of people with insufficient food consumption, countries with very high levels of hunger, updated daily and weeklyLimited countries now (9 African now) but 16 more planned in coming weeks; it is a forecast. Weekly snapshots for 14 countriesWFP Food Hunger Map  

WFP daily report  

Weekly snapshots
COVID cases, deathsDaily across countriesAvailable widely, commonly used sources but difficult to compare across countriesJohns Hopkins
High frequency telephone interviews around social and food security impactsMonthly updates from May 2020. Cover topics including (i) knowledge of existence of and channels of transmission of COVID-19; (ii) knowledge of and compliance with preventive measures with specific emphasis on social distancing and self-isolation; (iii) prices and access to food and non-food necessities; (iv) employment; (v) food insecurity; and (6) subjective well-being – with a focus on understanding the dynamics of economic impactsOnce available will be very valuable, for Ethiopia, Malawi, Nigeria, Tanzania, Uganda     LSMS high frequency phone surveys,
Global and bilateral trade, trade costs and mobility
   Source and frequencyComments on useHyperlinks and examples
Trade costs Baltic Exchange Dry Index Trading Economics, dailySpecific cost measure, does not cover many transport uses/modesTrading Economics
World tradeCPB world trade indicator, monthly, available with a one- to two-month time lag     IMF tracking of world trade using real-time shipping dataPartly a leading indicator, partly real data   Uses data for dry bulk, contain, vehicle, oil shipping dataCPB indicator described in FT      
IMF tracker
Bilateral tradeNational statistics office and ITC trade map (monthly data for major countries such as UK, EU, US, China and Japan available with a six-week time lag; annual data for low-income country source)   International data reported monthly with time lag (UN Comtrade)Trade data variable but long-runs are availableUK monthly trade stats  

German monthly data  

Comtrade
Mobility and entertainmentAircraft departures, bus and rail journeys; Google searches for entertainment, seated diners, retail footfall (updated daily)   Google Mobility data for retail, grocery, parks, transit, workplaces, residential visits (weekly)  Not easily available beyond reports       Google data for all countries on a weekly basisBank of England Monetary Policy Report Chart 2.26    

COVID-19 Community Mobility Reports
Capital markets, finance flows and monetary statistics
 Source and frequencyComments on useHyperlinks and examples
RemittancesCentral banks, monthly data, available with one to three months time lagCan vary much between monthsNigeria  

Kenya
Stock market prices, exchange rates, bond yieldsAvailable daily and immediately, e.g. FT or central bank    Bond prices and bond spreads (yield difference countries and safe havens such as US/German bonds)Varied sources but often subscription is needed   FT/Bloomberg often report statistics/figuresFT (paywall)
Private capital flows to emerging marketsIIF monthly updates on portfolio flow but not FDI flows, available with one to two years of lag (committed FDI data more recent)Lacks country detailsIIF
Bank lending statisticsBIF international bank lending, quarterly, available with five-month time lag BIS
Monetary statistics (central bank)Central banks maintain monthly and quarterly data on the monetary base and broad money, credit aggregates (e.g. to the private sector) and foreign assets and liabilities. Includes claims by banks on governmentQuality data on a select number of variablesKenya
Debt interest paymentsMonthly/quarterly, central bank websites, lags can be six months Kenya (Table 13)  

Nigeria debt service in 2019  
Ethiopia
Aid flowsOECD DAC   Humanitarian finance: COVID-19 Global Humanitarian Response PlanDAC (and national) data are available with long time gaps (a year) but humanitarian finance data are updated weekly; announcements are availableOCHA  

ODI donor announcement tracker
Employment and production
 Source and frequencyComments on useHyperlinks and examples
EmploymentILOSTAT provides monthly and quarterly labour force statistics (with a time lag of at least two months)Up-to-date data are patchy with respect to country coverageILO COVID-19 and labour market statistics
ProductionNational accounts, quarterly, available with six-week time lag in developed countries, or a lag of three to five months in some poorer countries   UNIDO has recent data on industrial production, e.g. for the US, China, Russia, Korea, Vietnam, Argentina, Chile, PolandData available with long time lag, and industrial production data cover few countriesUNIDO on impact of COVID-19 on manufacturing  
Others (selected)
 Source and frequencyComments on useHyperlinks and examples
Data PortalsWorld Bank, updated in an ongoing manner   Several others exist   ODI’s tracker of trackers (tba) Datasets from the World Bank

  World Bank: COVID and trade  

UN Global Partnership for Sustainable Development Data

Photo: Changes in food prices as a result of Covid-19.  John Mackedon / World Bank . CC BY-NC-ND 2.0

Donor responses to COVID-19: country allocations

We examine IMF, World Bank and European Commission country allocations in response to the COVID-19 pandemic. IMF allocations cover around 1–1.5% of GDP whereas World Bank allocations are worth 0.1% of GDP. Whereas only a small portion of total funding is dedicated to loan facilities, grants and debt relief for the poorest economies, overall donors allocate more (as a share of GDP) to poorer countries. The IMF allocates more to countries that are more dependent on exports and remittances and to countries expected to see output cut the most. However, donors do not allocate more resources to countries with less health spending or that are overall more vulnerable

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)

A global action plan for developing countries to address the coronavirus crisis: Southern perspectives

Developing countries face the deepest recession in a generation. Complying with lockdown guidance in developing countries will be very challenging, given the level of informality and the state of poverty and health capacities. The G20 and UN need to address shortcomings to enable inclusive, collective and coherent global leadership. Urgent actions required to address the health and socio-economic costs include global actions plans on aid and finance, trade and food security, and free flows of knowledge and mobility of health workers.

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)

The COVID-19 pandemic in the Caribbean: exposing existing economic vulnerabilities

The Caribbean faces an unprecedented economic shock from COVID-19 as demand for its major export service (tourism) has collapsed.
In response, many countries have initiated fiscal stimulus packages, some with support from international donors. However, many countries in the region are already heavily indebted and, while the effects of the current shock must be mitigated, more systemic issues also require tackling. Countries should avoid increasing their debt service obligations and instead secure debt for resilience swaps in order to build resilience to natural disasters, confront the imminent threat of climate change and build the climate-resilient infrastructure needed to boost trade and export diversification. G20 members must acknowledge the need for specific measures to assist small states to adapt to the global pandemic; this includes the role of remittances, for which costs of transfer must be reduced.

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)

Can the digital economy help mitigate the economic losses from COVID-19 in Kenya?

The digital economy is playing a key role in Kenya’s response to the pandemic, with opportunities rising in the sectors of (i) digital and digitally deliverable services; (ii) e-commerce; and (iii) online work.
As businesses shift online and people work from home, there is a rise in demand for digital services, particularly cloud computing services; however, less than 25% of MSMEs use cloud computing, compared with over 40% of large Kenyan firms. Digitally deliverable services can offer new employment opportunities but less than 50% of firms in the services sector in Kenya- barring IT and transport- have a website. E-commerce is taking off, with increasing demand for Fast-Moving Consumer Goods, entertainment electronics and productivity tools.

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)

The role of trade in recovering from the COVID-19 crisis

Trade lies at the core of the global current economic crisis; it will be also the cornerstone of the global recovery. The use of protectionist measures will put the recovery at risk and must be avoided.
There is a need to rethink the operation of value chains during the recovery to prepare them for crises in the future. Stimuli provided by developed countries will contribute to the global recovery if they are adopted fairly. The government share in the economy is rising. Flexibilised procurement rules will contribute to the recovery. Developing countries will need more and better-targeted support to maintain and restart their productive capabilities.

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)

A G20 safe and resilient supply chain action plan

The coronavirus crisis has laid bare the fragility of global supply chains that link G20 and poorer countries. Supply chains covering medical supplies, agricultural products and garments provide access to critical imports for G20 and other countries and generate important job opportunities in poorer countries.
A G20 supply chain action plan consisting of a package of trade, migration, finance, aid and business measures will benefit G20 and poorer countries. The UK should lead a dialogue suggested by the B20 and convene buyers, factories and a targeted range of countries around a targeted set of supply chains (medical supplies, food products, garments).

 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)

How can the European Union help developing countries address the socioeconomic impacts of the coronavirus crisis?

The EU’s response package of aid, development finance, trade and business should be a crucial part of a more ambitious G20 action plan that addresses the socioeconomic cost of coronavirus in developing countries.
The EU should step up, fast-track, front-load and leverage its aid and development finance, and foster coordination

San Bilal and Dirk Willem te Velde, April 2020

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With the global economy going into a steep recession, developing countries are facing considerable financing shortfalls. The UN Conference on Trade and Development warns of a $2.5 trillion finance shortfall; Asian forecasts are down by 5–10 percentage points; Africa is already facing major impacts. The UN Secretary-General has called for a $2.5 trillion fund for developing countries. African finance ministers have called for $100 billion. The average fiscal stimulus in Europe so far (12% of gross domestic product) is 15 times higher than in the poorer African countries (0.8%) – as the latter cannot afford it. This note discusses EU actions to support developing countries to address the coronavirus crisis

Photo: Loan repayment schedule. Simone D. McCourtie / World Bank. Licence: (CC BY-NC-ND 2.0)

The coronavirus pandemic and the governance of global value chains: emerging evidence

Global value chains (GVCs) had already begun to shorten after the Global Financial Crisis; the coronavirus outbreak may intensify this process, affecting the trade and development trajectories of some suppliers. Relaxing competition policy to support purchases and maintain supply by UK retailers should be accompanied by policy measures to support developing country producers; many face drastic reductions in orders and prices, which will prompt bankruptcies and induce new firm-level reorganisation. Lead firms have a duty of care towards their employees and the countries in which they operate; UK-led GVCs should stand by their employees across the value chain, in line with other social commitments. Development partners can do more to support links in the GVC; some lead firms are already supporting diversification efforts related to COVID-19; trade-related adjustment support should be provided.

Jodie Keane, April 2020

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Unlike the 2008/09 Global Financial Crisis, which preceded the Great Recession, COVID-19 is both a Keynesian demand shock and a supply shock. In addition to the transmission of a collapse in demand, supply shocks will occur because economic activity itself must stop to contain the spread of COVID-19. There is no historical parallel to this in modern times.

Comparative developing country case studies during the GFC showed how value chain governance – between firms and as influenced by governments – mediated vulnerability to the exogenous trade shock and its transmission. The effects will depend on the fiscal and monetary policies of governments and private sector/consumer behaviour within the country as well as across and between countries. Understanding these systems and their interaction is crucial to effective risk management. This is why the relationships between buyers and suppliers within global value chains (GVCs) matter.

Photo: Current scene in a market place in Kenya. World Bank / Sambrian Mbaabu. Licence: (CC BY-NC-ND 2.0)

Trade in services and the coronavirus: many developing countries are at risk

The pandemic, travel bans and lockdowns are reducing demand for transportation and travel services. Communications and internet commerce services are increasing. Exports of services in many developing countries are above the global average (as a share of total trade), putting them at even greater risk.
Measured exports of services tend to be concentrated in travel and transportation, which are already in decline. Ethiopia, Mauritius and Morocco may be particularly hit through this channel, as 44%, 33 and 25%, respectively, of their combined goods and services exports are vulnerable. Travel exports in Cambodia represent 17% of GDP.

Max Mendez- Parra, March 2020

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The coronavirus pandemic has already led to major economic and social impacts across the world. In many developing countries, the fall in commodity prices is having a very strong effect. Moreover, the fall in demand is affecting other exports, such as those of manufactures. Trade in services appears to be being overlooked in considerations of the implications of the lockdowns on economies. Lack of good data makes it harder to understand the importance of services in trade. This note discusses how the lockdowns could affect trade in services. It also assesses the vulnerability of many developing countries based on the importance of services in their exports and on the composition of the most affected sectors in their exports.

Photo: Trade activity in a port in Cambodia. Chhor Sokunthea/ World Bank. Licence: (CC BY-NC-ND 2.0)

Development finance institutions and the coronavirus crisis

Development finance institutions (DFIs) are mandated by their shareholders to provide finance to the private sector (usually at commercial terms, but subsidised implicitly), crowd in private sector finance and have a development impact.
While DFIs aim to be additional to the market, they have not been sufficiently counter-cyclical in past crises. That has to change, as poor country firms and their workers face major hardship now. Today’s crisis is larger than those in the past. We suggest shareholders provide regulatory and financial space for DFIs to fast-track new investments, allow for some repayment postponements and announce a Bounce Back Better facility, to save companies and workers from bankruptcy and to protect previous transformation efforts so that the bounce-back is faster and better.

Stephany Griffith-Jones and Dirk Willem te Velde, March 2020

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Developing countries are facing considerable financing shortfalls as the global economy is going into a steep recession. Immediate challenges exist with regard to financing firms and workers in the poorest countries, including in Africa. If these firms collapse, and others stop investing, some of the major engines of a country’s transformation path may not survive, and will start shedding jobs. Traditional trade finance solutions that emerged during the 2008 global financial crisis will not solve these problems, as there is little trade now.

Development finance institutions (DFIs, such as IFC, CDC, FMO and DEG) provide finance (loans, equity, guarantees) and technical assistance to the private sector in low- and middle-income countries. The majority shareholders are governments. The mandates of DFIs usually combine provision of finance on commercial terms, additional to the market, earning a financial return and contributing to development.

DFIs should be more counter-cyclical in the current crisis. This may involve them abandoning conservative lending practices, if shareholders allow potential future losses on a portion of DFI portfolios. This is urgently needed, as businesses across the developing world are, or are at risk of, going under. A subsidised Bounce Back Better facility will have major returns in protecting workers and investments. It may facilitate future higher payments by businesses, if it leads to quicker growth.

Photo: Empty street in Nairobi, Kenya. World Bank / Sambrian Mbaabu. Licence: (CC BY-NC-ND 2.0)

The coronavirus pandemic and small states: a focus on Small and Vulnerable Economies

The global coronavirus pandemic has struck at a time when Small and Vulnerable Economies (SVEs) were already facing weak trade growth, with year-on-year trade growth already negative by Q3 2019 for the Caribbean region. Tourism exports could be halved in 2020, with major economic repercussions, with losses that could range between 4% and 26% of gross domestic product, varying by SVE. The value of stimulus packages announced so far by selected SVEs amounts to between 0.03% of GDP (Antigua and Barbuda) and 2.6% of GDP (Fiji), compared with 8% on average by G20 members. Data availability is scarce and assessments are partial, yet we need ongoing tracking of impacts.

Jodie Keane, March 2020

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Unlike the 2008/09 global financial crisis (GFC), which preceded the Great Recession, COVID-19 represents both a Keynesian demand shock and a supply shock. In addition to the transmission of a collapse in final and effective demand, an endogenous supply shock will occur because economic activity itself must stop to make it possible to contain the spread of COVID-19. There is no parallel for this in modern times. The interaction between the above shocks and economic effects depends on governments’ fiscal and monetary policies and private sector/consumer behaviour within each country as well as across and between countries. The provision of major financial stimuli along with social safety nets and actions taken by ‘socially responsible’ firms will be pivotal to avoid dire social effects. But not all countries are in a position to respond, especially Small and Vulnerable Economies (SVEs), a number of which have been hit by a series of major economic shocks in recent years. This note discusses the channels through which SVES will be affected, focusing on tourism and remittances.

Photo: Scenic view of a beach in Tonga. Asian World Bank. Licence: (CC BY-NC-ND 2.0)

Trade and the coronavirus: Africa’s commodity exports expected to fall dramatically

The prices of commodities have fallen by between 9% (coffee) and 61% (oil) since the start of the year mainly because of the fall in global demand generated by the current lockdowns. African countries are extremely exposed to commodity price swings, as half of their merchandise exports is concentrated in 10 commodities. Africa could lose between US$ 36 billion and US$ 54 billion in export revenue. For some countries, this could be as high as 20% of their gross domestic product. Oil exporters such as Nigeria, South Sudan and Angola may see their export revenues falling by more than 20%.

Max Mendez- Parra, March 2020

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The coronavirus pandemic is having notable economic and social effects across the world. Even in countries where the disease has not yet affected a large number of people, the impacts are beginning to be seen. Trade appears to be particularly affected as countries enter into lockdowns and economic activity stops. While trade statistics are not yet available, the evolution of commodity prices and the exposure of many African countries suggest the effects of the crisis will be severe.

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

Three proposals to support African garments workers during the coronavirus crisis

US and European orders for garments have ceased, with effects rippling throughout value chains, affecting factories in Asia and Africa. Their workers face extreme hardship.
We explore three options to protect such workers during this recession in an African context: (i) a worker subsidy scheme (ii) a subsidised training package to retain workers and manufacturing capabilities (iii) retooling of garment factories to produce garments to satisfy medical needs.
Each option requires different commitments from buyers, factories, workers, the public sector and donors.

Dominic McVey and Dirk Willem te Velde, March 2020

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Exports of African textiles and garments have grown rapidly over the past decade. Exports from African Growth and Opportunity Act (AGOA)-eligible countries to the US have nearly doubled, from $790 million in 2010 to $ 1.5 billion in 2019, with Kenya one of the largest suppliers and Ethiopia the fastest growing. Unfortunately, US orders are considerably down following store closures, and operations in African factories could cease to operate within weeks.

If nothing is done, factories in Kenya would find it too expensive to pay their workers during uncertain times. They could be forced to close and implement lay-offs. Workers in Ethiopia will leave factories, even if they received subsidised pay. But in other contexts, factories with the right networks and capabilities may be able to retool.

This note provides three proposals to support garment workers in African countries who may lose their jobs in two to three weeks time. The proposals may have applicability in other sectors but need to be tailored to the specific context.

Photo: Factory workers producing shirts at Sleek Garment Export, in Accra, Ghana Dominic Chavez /The World Bank. Licence: (CC BY-NC-ND 2.0)