Shaping the macro-economy in response to Covid-19: a responsible economic stimulus, a stable financial sector and a revival in exports

July 2020 to October 2021

The Covid-19 outbreak is hitting the poorest countries hard in terms of increases in poverty and hunger, falling exports and capital flows, and weaker growth, but their policy responses (outside lockdown policies) are often much less pronounced than developed countries. Poorer countries will be considering how to emerge from the recession in a better and stronger position.

This will depend in part on macroeconomic policies that foster an inclusive and sustainable fiscal stimulus, a stable but enabling financial sector, and a rapid recovery in exports of goods and services.

This project will undertake country specific scenarios (including in Bangladesh, Sri Lanka, Kenya, Tanzania and Peru) and consider relevant policy options and their economic, social and environmental effects in fiscal, financial and trade area, within specific country contexts.

The overall objective of the project is to inform policies in selected developing countries (Bangladesh, Sri Lanka, Kenya, Tanzania and Peru) to address the Covid-19 recession and recovery, with a focus on the interface between macroeconomic policies and economic, social (including gender) and environmental outcomes.

The project will develop methodology papers on three issues:

  • Analysing macro-economic performance (e.g. growth, debt, finance and exports).
  • Building scenarios on economic growth, debt, financial markets, and exporting in the coming 2 years.
  • Discussing macro-economic policy options (fiscal, macro, financial and trade) in driving a more resilient and employment intensive growth, whilst controlling debt and inflation, avoiding financial crises in the near future, and ensuring climate compatibility.

This methodology will be developed with partners, who will implement it in 5 countries, leading to a set of country papers that can be used to inform country level policy makers. The project will also synthesise the results and aim to inform policies to recover from the Covid-19 crisis.