Increase public spending, expand social protection

Increasing public spending and widening social protection measures with a proper registry of people could prove effective in reviving the economy during the pandemic, as occurred in some countries, according to two noted economists.

Brazil spent 8 per cent of its GDP on the disbursement of cash among citizens in one go when the pandemic surfaced. As a result, its economy is still healthy compared to other Latin American nations, said Martin Rama, chief economist of the World Bank for Latin America and the Caribbean.

Brazil was able to properly channel the stimulus money among people as it has very good social registry systems, he said.

"Creating a reliable social registry is one of the priorities for governments that will come to big use in the future," said Rama.

"I would like to see Bangladesh spending more," said David Hulme, a professor of development studies at the University of Manchester.

"Also, you need a well-developed social registry process, and it is a lesson for the country. Scale up the social protection."

They spoke at the concluding session titled "Covid-19 Recovery: Contexts and Priorities – Developing Countries' Perspective" at the Sanem Development Conference on Saturday night.

The South Asian Network on Economic Modeling (Sanem) organised the virtual discussion, where its executive director, Selim Raihan, moderated the concluding session.

Brazil did not face any complex challenge in disbursing the stimulus and testing and tracing Covid-19 patients because of its strong social registry. In contrast, its peers have been facing many difficulties for not having such a well­-prepared database of citizens, said Rama.

"We should not go for a magic solution to save us from the pandemic. Probably we need to learn how to live with the pandemic," he said while responding to a query on the future of the global economic recovery from the fallouts of Covid-19.

The economist was cautiously optimistic about the recovery.

"2022 might be even tougher for the global economy as many countries could not manage to tackle Covid-19 very well."

He said the world had seen a mixture of winners and losers, with many having done well and others who could not. Covid-19 has also brought some opportunities for some countries, and China is one of them.

The Chinese economy could recover well from the fallouts of Covid-19 as its supply chain is performing quite well, he said, adding that South Asian nations like Bangladesh could avail a share of the opportunities diversifying their value chains.

Bangladesh and Vietnam can improve their share of the global value chain to avail opportunities of China's recovery as the sales of raw materials and food have been growing in China during the pandemic, said the economist.

Similarly, middle-income countries like Bangladesh can avail of opportunities of the US stimulus payments. The US economy is also performing well because of the stimulus payments, Rama said.

He suggested governments do their homework to recover from the fallouts of Covid-19.

For instance, the tax system needs to be reformed, debt management turned efficient, and education and health systems improved, particularly by increasing the number of intensive care units in hospitals and creating a long to-do list, he said.

He also suggested bringing reforms in using technologies and redesigning health insurance, the financial architecture and social protection measures based on the number of people in formal and informal sectors and how much they were earning.

Prof Hulme said some countries would do better and some would not. "This is going to be a marathon."

He criticised unscientific reasoning behind lockdowns in various countries which affected the lives and livelihood of the people.

"A smart lockdown could have saved the lives and livelihoods of people better compared with the current mode of lockdowns."

A smart lockdown is an area or sector-specific lockdown to contain the transmission of infections.

For instance, some sectors in the UK were out of the purview of the general lockdown, and these sectors performed well even during the lockdown.

"However, the mortality rate could not be contained there," Hulme added.

He did not support the closure of the informal sector as most of the employment was generated in the informal economy.

Lockdowns of a similar nature will not work well everywhere, he said, adding that the type of lockdown imposed in the UK would not work in India and Bangladesh.

"So, it is better not to follow other countries about the nature of lockdown," Hulme said.

Prof Raihan said Bangladesh had targeted to transfer Tk 2,500 to 5 million people but finally reached only 3.5 million.

"I think the whole system does not support the demand of the time," he said while talking about the weak social registry and disbursement.