Central banks in some emerging market and developing economies have employed asset purchase programs in response to pandemic-induced financial market pressures, in many cases for the first time.
When targeted to market failures, these programs appear to have helped stabilize financial markets during the initial stages of the crisis. However, in economies where asset purchases continue to expand and are perceived to finance fiscal deficits, these programs may erode central bank operational independence, risk currency weakness that de-anchors inflation expectations, and increase worries about debt sustainability.
Download Global Economic Prospects. East Asia and Pacific: Growth in the region is projected to accelerate by 7. For more, see regional overview. Europe and Central Asia: The regional economy is forecast to grow by 3. Latin America and the Caribbean: Regional economic activity is expected to grow by 3. South Asia: Economic activity in the region is projected to expand by 3. Sub-Saharan Africa: Economic activity in the region is on course to rise by 2. The World Bank Group , one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response.
It is supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs.
The U. Moreover, businesses pulled back on investments amid a severe recession and massive uncertainty about the future shape of the economy. In the summer and fall of , business investment after accounting for capital depreciation fell well below 2 percent of GDP—its lowest levels since the first half of Furthermore, corporate governance pressures still led corporations to prioritize shareholder rewards over productive investments.
Profits recovered quickly after taking a hit in the second quarter of By the third quarter, the ratio of after-tax profits to total corporate assets for nonfinancial corporations stood at 2. State and local governments, which own and operate almost all infrastructure assets, may not be able to fill the void left by falling private investment without assistance from the federal government. Many infrastructure repair and construction projects that were funded and got underway as the pandemic hit are now wrapping up.
The drop in tax collections over the past year in most states, especially as sales, business taxes, public transit receipts, and other sources of revenue fell sharply during the initial shutdowns and ongoing recession, may limit the ability of state and local governments to begin new projects, sapping demand for construction work and undermining long-term recovery. And all this has taken place against a backdrop of chronic underinvestment in infrastructure prior to the onset of the pandemic, including in critical areas such as public transportation, roads, and schools.
First, many workers, particularly women, have been forced to reduce their work hours or leave the labor force entirely to manage the increased demands of caring for sick family members or caring for children home due to virtual schooling or closed child care providers. Additionally, workers often do not have the money to pursue more training and education. Temporary layoffs turned into permanent ones, emergency savings dwindled, and health care emergencies increased amid a raging global pandemic.
The pandemic has also created a lot of uncertainty about the future direction of the economy. Workers and students often have to worry whether they will need any additional skills by the time they are done with their education and training. Following the pandemic, that worry is even greater. Entire industries, such as restaurants, hotels, transportation, and entertainment venues, among others, could undergo wholesale changes that could require new, to-be-determined skills as the industries seek to rebound.
Finally, schools, colleges and universities, and trade schools faced their own financial challenges and uncertainty.
They had to retool from in-person to remote learning, while addressing the financial fallout of less financial government support, dwindling enrollments, and increased spending on public health measures as well as digital support for remote learning. Funding cuts to education during and after past economic downturns, such as the Great Recession, have been associated with lower student achievement.
Workers and their families may not have been able to find the education and training opportunities they wanted and needed in the pandemic. Data from the U. Before the pandemic, more than one-quarter of households, or More than one-third of these households, Only 1. Significantly more people decided to cancel or cut back on their postsecondary education during the pandemic than chose to stay the course or even add more classes.
These training shortcomings eventually translate into fewer opportunities for those affected as well as a less prepared workforce, which negatively affects economic growth. The federal funds going to households, businesses, and state and local governments are desperately needed to support all parts of the economy that are struggling from an unprecedented onslaught on their financial health. These payments are an important first step to lift the economy back up to its previous levels, reducing unemployment, stabilizing economic growth, and improving financial stability.
More is needed, though, to return the economy to much faster growth and build a sustainable economy that works for everybody. Faster productivity growth, and thus faster economic growth, will create even more opportunities for employment and wage gains. The ARP already includes some measures, such as financial support for higher education, that would have positive supply-side effects.
Importantly, public policies can break the interconnected trends of high inequality, widespread insecurity, and low investment that underlie low productivity growth. Second, a number of policies can substantially reduce income uncertainty and volatility for households.
Most notably, social insurance programs, such as unemployment insurance, health insurance, and Social Security, are critical tools to give working families some peace of mind. Third, more federal funding for research and development, a green infrastructure, and more support for education—all purviews of the public sector—can lift up productivity growth. All three types of policies will boost productivity growth. Higher incomes due to increased pay and better benefits, such as paid family and medical leave, make it less likely that workers leave an employer.
This makes it easier for workers to concentrate on their work since they are typically worrying less about how to pay their bills. All of these steps mean that households will have more skills and be able to better use those skills, thereby increasing productivity across the economy.
Moreover, large-scale public investments will create new technologies for companies and reduce the financial risks associated with new ventures. In the end, businesses and people will be better positioned to use scarce resources. Support for workers includes providing help for people to pursue the careers they want. This can be done in several ways, mainly by Congress through legislation and the administration through regulatory and executive actions:.
Future legislative initiatives, such as an infrastructure and jobs package, need to make additional, explicit pro-growth investments to expand the capital base, boost innovation, and create more jobs. In particular, the weak economic position of many businesses and households means that the economic slowdown could last a long time. Such a package should:. Strengthening economic growth in the United States is both a short-term and long-term challenge.
In the short term, policymakers needed to boost economic growth through the American Rescue Plan to jump-start a strong and broadly shared recovery. The economy shrank by 3. In the long term, Congress will need to make sure that strong growth and job creation will continue for the long haul, which will make it easier to address looming economic challenges, from climate change to an aging society.
Pursuing the combination of the various policy steps laid out in this report will break the vicious cycle of low business investments, low productivity growth, high income uncertainty, and massive economic inequality that has kept economic growth below its potential over the past two decades. Faster innovation and more rapid growth will make it easier to address the myriad known challenges such as the transition to a percent clean energy future, educational inequity, and an aging society.
It will also better prepare the country to tackle any new and yet-unknown challenges. Through a series of executive orders and proposed legislation, President Biden has signaled that he understands and will address the intertwined challenges of low investment, meager productivity growth, massive inequality, and widespread economic insecurity. It boosts economic demand among businesses, households, and state and local governments hardest hit by the pandemic.
It also starts to make investments in people, businesses, and communities. Given the past two decades of lackluster productivity growth, the federal government will need to do more to tackle this challenge. The American Jobs Plan is a promising second step. It includes direct investments that expand the capital base: investment in infrastructure such as ports, roads, water, electric, and internet infrastructure. It will also raise demand and boost private investment in manufacturing and other sectors where business investment has been weak for more than a decade.
And it supports workers who care for their loved ones who are elderly or have disabilities. While infrastructure investment is about accelerating long-term growth, it will also speed recovery in crucial sectors and get people back to work to prevent the skill loss that poses real threats to productivity and GDP for decades to come.
Overcoming decades of lackluster and unequally shared economic growth requires large investments. The AJP delivers a series of investments that enables a transition to an economy that may grow at higher levels, delivering high-quality jobs and more broadly distributed economic benefits. Christian E. Table B The year-to-year numbers of retirement plan access and coverage do not change much. Moreover, researchers use data from the U.
Data thereafter are no longer reliably comparable to earlier years. This scaling up of AI cuts through all sectors of the economy, including transport, healthcare, business, digital security and others.
The transport sector alone saw USD 18 billion of VC funding in with mobility and autonomous vehicles taking centre stage in global efforts to scale up broader sustainable mobility drives. However, governments and other actors must think hard about how best to harness the power of technology with people in mind. The OECD AI Principles focuses on human-centred values and nurturing trust — and can therefore support inclusive growth, sustainable development and well-being.
Morocco Mozambique Moldova Myanmar. Romania Russia Rwanda. Western Sahara Yemen Zambia Zimbabwe. Agriculture and fisheries Chemical safety and biosafety Competition Corporate governance Corruption and integrity Development Digital. Industry and entrepreneurship Innovation Insurance and pensions Investment Migration Public governance Regional, rural and urban development.
Chart of the Week: Climate. See more Data Insights. COP26 voices: Perspectives on Climate. But the question, of course, is what form that will take and which political forces will control it. The pandemic and subsequent recovery will accelerate the ongoing digitalization and automation of work—trends that have eroded middle-skill jobs while increasing high-skill jobs during the last two decades and contributed to the stagnation of median wages and rising income inequality.
Many low-wage, low-skill, in-person service jobs, especially those provided by small firms, will not return with the recovery. Changes in demand, many of them accelerated by the economic dislocation wrought by the pandemic, will change the future composition of GDP. The share of services in the economy will continue to rise. But the share of in-person services will decline in retail, hospitality, travel, education, health care, and government as digitalization drives changes in the way these services are organized and delivered.
Many low-wage, low-skill, in-person service jobs, especially those provided by small firms, will not return with the eventual recovery. However, workers providing essential services such as policing, firefighting, health care, logistics, public transportation, and food will be in greater demand, creating new job opportunities and increasing the pressure to raise wages and improve benefits in these traditionally low-wage sectors.
The downturn will accelerate the growth of nonstandard, precarious employment—part-time workers, gig workers, and workers with multiple employers—leading to new portable benefits systems that move with workers and broaden the definition of employer.
New low-cost training programs, digitally delivered, will be required to provide the skills required in new jobs. The sudden dependence of so many on the ability to work remotely reminds us that a significant and inclusive expansion of Wi-Fi, broadband, and other infrastructure will be necessary to enable the accelerating digitalization of economic activity. The Chinese Challenge to American Primacy. Why will this trend continue? The American population has lost faith in globalization and international trade.
Free trade agreements are toxic, with or without U. President Donald Trump. By contrast, China has not lost faith.
Why not? There are deeper historical reasons. By contrast, the past few decades of economic resurgence were a result of global engagement. The Chinese people have also experienced an explosion of cultural confidence. They believe they can compete anywhere. Consequently, as I document in my new book, Has China Won? If its primary goal is to maintain global primacy, it will have to engage in a zero-sum geopolitical contest, politically and economically, with China.
However, if the goal of the United States is to improve the well-being of the American people—whose social condition has deteriorated—it should cooperate with China. Wiser counsel would suggest that cooperation would be the better choice. However, given the toxic U. Other installments include:. Haass, G. Nye, Jr. Walt, Alexandra Wrage.
Smith, Dick Startz. The pandemic will change the world forever. We asked 12 leading global thinkers for their predictions. The pandemic is transforming urban life. We asked 12 leading global experts in urban planning, policy, history, and health for their predictions. Travel and tourism will be changed forever.
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