PETALING JAYA,Mar 26: The World Bank believes that governments in East Asia and the Pacific will face a number of policy dilemmas over the next few years, and their response will largely shape their recovery from the economic crisis caused by the Covid-19 pandemic.
It identified the following key areas as needing particular attention:
- The race between vaccinations and the spread of the virus,
- Providing financial aid without destabilising the economy, and
- Transitioning to a green economy without hurting growth or the poor.
In its latest East Asia and Pacific Economic Update, titled “Uneven Recovery”, the World Bank highlighted the difficulties the region will likely face in achieving short-term growth and building post-pandemic resilience.
It predicted that the vast difference in vaccine distribution between rich and poor countries will leave many countries short of the 80% herd immunity threshold.
“Estimates show that at the end of 2021, in the most optimistic scenario, efficacy-adjusted coverage in high-income countries will be 81% and in developing countries 55%,” it said.
Vaccine producers such as China and India could, however, remedy the situation by scaling up their operations and helping countries which lack the production capacity to attain efficient approvals and supply.
On fiscal relief measures, the World Bank said “evidence so far suggests that in many East Asian and Pacific countries, relief is less than earning losses, stimulus has not fully remedied deficient demand, and public investment is not a significant part of recovery efforts”.
It said countries must balance increased aid offerings against future financial instability that could result from countries taking on more debt.
Better targeting of stimulus would ensure aid is spent effectively and translates more directly to growth, it said.
The report also recommended that lawmakers put in place long-term strategies to reduce wastage in order to bolster post-pandemic growth.
On the green economy, the World Bank said transitioning towards a low-emission economy would be in line with global trends and would be a future-proofing endeavour.
However, it warned about the risk of low-wage workers losing jobs and that this could slow growth in the short term during the transition period.
As such, finding a compromise will be key, such as investing revenue from carbon taxes into easing social impacts caused by the new industries development.
It also advocated for international and regional collaborations to allow countries to take more aggressive climate action than might be financially feasible on their own, such as richer countries investing in cross-border green assets or sharing their expertise and technology.