COVID ECONOMIC RECOVERY INDEX

Many possible shapes have been put forward for the recovery process (Sheimer & Yilla, 2020). Two factors will play a major role in recoveries: the immediate impact of the measures to contain the pandemic shock on GDP, and the trajectory the country will take once the initial shock has been absorbed. Figure 3 shows how countries differ in their ability to absorb the short-term shock and their economic resilience. In the upper right quadrant are the countries capable of absorbing the shock, with greater economic agility, which are likely to recover faster. The Nordic economies are in this group, as are many European countries including Germany, Switzerland as well as most of Eastern Europe (see Box 2). Among emerging economies, Kazakhstan, Russia, and Thailand stand out for their relatively good performance. While the individual strengths of each of these countries contribute to this outcome, a common feature is low unemployment at the outset and flexible labour markets with good social security systems. All these factors will help them weather the crisis and provide a good base for transforming their economies in future. 

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While they may have been deeply affected initially, countries in the lower right quadrant, including the United Arab Emirates, Luxemburg, Singapore, Israel, Malta, or Ireland, display stronger economic resilience, which will support recovery. These countries are mostly relatively small, open economies, highly dependent on international trade and/or flows of capital, and on sectors that are vulnerable to COVID containment measures. Most of these countries have strong institutions and well-educated populations and are digitalized. What is important for countries in this group is to focus on short term stimulus to avoid layoffs and bankruptcies to the degree possible. Once the initial shock has been weathered, these countries have a strong capacity to recover.

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In the upper left quadrant are countries that were less exposed and/or more able to absorb the initial shock, but that have lower resilience than most other economies. For the most part, these countries may be less affected by the initial shock because they are less dependent on vulnerable industries and/or are less connected internationally than their peers. Examples include India, Ethiopia, Ukraine, Egypt, Pakistan, or Bolivia. However, the economic resilience of these countries is low due to often rigid labour markets and low levels of education and digitization: These countries may be left further behind in terms of their economic growth as a result. Many of these countries are low income economies. They are affected to the same degree by the pandemic (absorptive capacity) but have significantly lower capacity to rebound. Over the medium term, the fallout from COVID risks exacerbating economic differences between developing and developed countries, thus undoing much of the convergence in terms of prosperity and standards of living achieved in recent years. 

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Finally, in the lower left quadrant are countries with low absorption capacity and low resilience while are likely to suffer the most and recover slowly. Most of these countries are low income economies, but this group also includes several middle-income countries including Brazil, Mexico, Colombia, Ecuador, and the Dominican Republic. These countries should be a priority for development assistance to strengthen economic resilience and the recovery going forward, as well as for humanitarian assistance to mitigate the most important effects of the economic crisis on people.

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CERI results by level of development