In a new report titled, ‘Healing the pandemic’s economic
scars demands prompt action,’ the Washington-based lender said pandemic-induced
losses for both economic output and employment would be significant in coming
years, as discussed in its April’s World Economic Outlook.
According to the report, emerging market economies were
likely to endure greater losses because they had relatively less access to
vaccines and their pandemic-support packages were smaller. For many economies,
the outbreak of the war in Ukraine was adding to the challenges, it noted.
The report read in part, “Our new analytical work finds
that, among the key causes of scarring from the pandemic are the prospective
weak labour market recoveries in emerging market economies and the severe
disruptions to schooling over the past two years across both advanced and
emerging economies. Policymakers must act promptly to repair the damage from
the crisis and prevent decades of diminished economic output from lost human
capital.”
The report added that recessions often had lasting impacts
on workers who lost jobs at the depths of the downturn. They might find it hard
to get new positions during the recovery and might lose some skills from
prolonged joblessness, it said, noting that such losses harmed the affected
workers and also reduced overall economic output.
It further read, “In addition to the challenges in the
labour market and from schooling disruptions, there are other channels for
scarring as well. For example, the increase in corporate debt and
vulnerabilities in the industries hit hardest by the pandemic could also
contribute to scarring by weighing on investment and productivity for years to
come, according to new research presented in the IMF’s April World Economic
Outlook.”
According to the IMF, time was short for limiting learning
losses because education was cumulative, each year building on the last. To
minimise enduring harm, countries must quickly assess setbacks to learning and
implement the appropriate measures to help students.
“In addition, pandemic-era support measures for firms and
workers that helped limit pandemic scarring, such as credit guarantees and job
retention policies, will need to be scaled back as recoveries strengthen. Doing
so will help avoid holding back the reallocation of workers and resources to
their most productive uses as the pandemic eases, and help foster productivity
growth.
“Instead, policies could shift to helping people to adjust
to changing labour markets, such as through well-targeted job-search programmes
and additional support for training to build new skills. Moreover, to limit
elevated pockets of corporate distress turning into significant business
failures or investment slumps, it’s also crucial to ensure well-functioning
mechanisms for corporate insolvency and out-of-court restructuring,” the report
further said.