The economic and labour crisis created by the
COVID-19 pandemic could increase global unemployment by almost 25 million,
according to a new assessment by the International Labour Organization (ILO).
However, if we see an internationally coordinated policy response, as happened in the global financial crisis of 2008/9, then the impact on global unemployment could be significantly lower.
The preliminary assessment note, COVID-19 and the world of work: Impacts and responses , calls for urgent, large-scale and coordinated measures across three pillars: protecting workers in the workplace, stimulating the economy and employment, and supporting jobs and incomes.
These measures include extending social protection, supporting employment retention (i.e. short-time work, paid leave, other subsidies), and financial and tax relief, including for micro, small and medium-sized enterprises. In addition, the note proposes fiscal and monetary policy measures, and lending and financial support for specific economic sectors.
Based on different scenarios for the impact of
COVID-19 on global GDP growth, the ILO estimates indicate a rise in global
unemployment of between 5.3 million (“low” scenario) and 24.7 million (“high”
scenario) from a base level of 188 million in 2019. By comparison, the 2008-9
global financial crisis increased global unemployment by 22 million.
Underemployment is also expected to increase on a large scale, as the economic consequences of the virus outbreak translate into reductions in working hours and wages. Self-employment in developing countries, which often serves to cushion the impact of changes, may not do so this time because of restrictions on the movement of people (e.g. service providers) and goods.
Falls in employment also mean large income losses for workers. The study estimates these as being between USD 860 billion and USD 3.4 trillion by the end of 2020. This will translate into falls in consumption of goods and services, in turn affecting the prospects for businesses and economies.
Working poverty is expected to increase significantly too, as “the strain on incomes resulting from the decline in economic activity will devastate workers close to or below the poverty line”. The ILO estimates that between 8.8 and 35 million additional people will be in working poverty worldwide, compared to the original estimate for 2020 (which projected a decline of 14 million worldwide).
Swift and coordinated policy responses
“This is no longer only a global health crisis, it is also a major labour market and economic crisis that is having a huge impact on people,” said ILO Director-General Guy Ryder. “In 2008, the world presented a united front to address the consequences of the global financial crisis, and the worst was averted. We need that kind of leadership and resolve now,” he added.
The ILO note warns that certain groups will be
disproportionately affected by the jobs crisis, which could increase
inequality. These include people in less protected and low-paid jobs,
particularly youth and older workers. Women and migrants too. The latter are
vulnerable due to the lack of social protection and rights, and women tend to
be over-represented in low-paid jobs and affected sectors.
“In times of crisis like the current one, we have two key tools that can help mitigate the damage and restore public confidence. Firstly, social dialogue, engaging with workers and employers and their representatives, is vital for building public trust and support for the measures that we need to overcome this crisis. Secondly, international labour standards provide a tried-and-trusted foundation for policy responses that focus on a recovery that is sustainable and equitable. Everything needs to be done to minimize the damage to people at this difficult time,” concluded Ryder.
South Sudan Economic Analysis Shows Growth Promise Amid Fragility
After a four-year contraction, South Sudan’s economy appears to be recovering and reached 3.2 percent in FY18/19. However, according to the World Bank’s latest Economic Update for South Sudan, the economy is still affected by high inflation which stood at 170 percent in October 2019. The report forecasts favorable economic outlook with growth expected to be in the range of 7.9 percent during FY2019/20 and exports projected to increase by 23 percent. However, the report cautions that a collapse of the peace agreement could push the economy back into recession over the same period.
According to the South Sudan Economic Update: Poverty and Vulnerability in a Fragile Environment, growth was mainly driven by positive movement in the oil sector, which recovered strongly. Dividends from the peace agreement also reduced conflict in certain regions across the country and led to a slight recovery in a few non-oil sectors. Growth in the oil and mining sectors was estimated at 10.7 percent, services sector is estimated to have grown by 0.4 percent, while agriculture is estimated to have contracted by 2.5 percent.
Despite the positive economic achievements, South Sudan remains among the poorest countries in the world and four out of five South Sudanese still live below the international poverty line of $1.90 per day. Hyperinflation, high debt burden, distortions in the foreign exchange rate market, challenges in budget execution, as well as sub-national conflict further exacerbate the situation.
“South Sudan has registered positive economic growth. However, in order for growth to have more impact on the lives of ordinary citizens, a significant portion must be reinvested in improving food security and basic service delivery,” said Husam Abudagga, World Bank Country Manager for South Sudan.
According to the report, South Sudan could reach its economic and social ambitions by:
- Addressing the underlying causes of conflict and restoring peace and stability;
- Implementing comprehensive macroeconomic reforms, including measures to unify the exchange markets, reduce inflation, and diversify the economy;
- Improving budget transparency and taking steps to provide timely and accurate information on revenue, spending, arrears, debt, and budget execution;
- Increasing allocations and investment for service delivery, particularly in education, health, and rural development, necessary to improve resilience, reduce poverty, and build stock of human capital and avoiding a lost generation.
The World Bank’s South Sudan Economic Update series aims to provide regular, comprehensive analysis of the South Sudanese economy. The report is intended to encourage constructive dialogue on public policies among the country’s leadership and key stakeholders including development partners, academia, the private sector and civil society.
Less Than Half Pay for Media, News and Entertainment, But Willingness to Pay Is Rising
Less than half of consumers pay for media, with 16% paying for news and 44% paying for entertainment – but a willingness to pay is rising, according to new research published by the World Economic Forum.
Between 80% and 90% of consumers spend 24 hours reading, watching or listening to news and entertainment per week. Almost 60% of consumers have registered for a media service (free or paid) and have on average seven media services covering video, sport, gaming, music, podcasts, news and blogs. The study also highlights three strategic shifts in media – new payment architectures, the rise of podcasts and changing advertising environments.
“The current coronavirus challenge only emphasizes the indispensable role that media play in society today. With the value of content growing, the industry needs financial models that enable them to fulfil their social functions while still supporting widespread access to critical content. This can’t happen in isolation: it requires dialogue, including with regulators, to find solutions that balance innovation, consumer welfare and corporate responsibility of every stakeholder in the media industry”, said Kirstine Stewart.
The research is based on a survey, conducted for the Forum by Nielsen between early October and late November 2019, which asked more than 9,100 people in China, Germany, India, South Korea, the United Kingdom and the United States about their media consumption and payment habits and preferences. In addition, between May 2019 and January 2020 the World Economic Forum consulted around 100 executives from advertising, entertainment, news and other parts of the media industry about business strategies to attract and retain consumers – along with the implications these could have for society.
The consolidated findings show that, although the proportion of people paying for content may be small today, future willingness to pay is rising. Globally, those willing to pay in the future is 53% for news and 70% for entertainment.
Furthermore, two of the most dynamic global economies – China and India – show reasons for optimism. In China, 25% pay for news and 59% have at least one paid video or sport service, numbers may be explained by the greater prevalence of pay-per-use models in the country.
In India, consumers report a significant willingness to grow the number of news and entertainment services they pay for. Respondents say they are willing to pay for closer to three entertainment services and four news services, more than the maximum of between one and two services that most other countries report a willingness to pay for. This is juxtaposed with data from other countries, where consumers appear inclined to reduce their number of paid entertainment services, reporting preferences for a reduction in the number they have at present.
The findings also show that across countries young people (16-34) are more likely to pay for content. An average of 61% currently pay for entertainment and 17% for news, figures that are in both cases above the global averages in the general population. Looking at socioeconomic status, however, shows a greater presence of paid news subscriptions among higher income or higher status individuals. This suggests that concerns of emerging “information inequalities”, where wealthier consumers have access to more or higher quality information, are very real.
With this in mind, the Forum’s research considers the important question of who should be responsible for funding the production of content. On average, most consumers (55%) are aware that advertising can subsidise content creation. Yet almost half of respondents skip adverts whenever possible and almost three in four make efforts to reduce their exposure to it.
Although advertisers, consumers and governments each have a role to play in financing content, the survey results suggest that consumers expect governments to take a bigger role in supporting access to news than entertainment: 35% versus 18% respectively.
As these trends play out in an increasingly dynamic media environment, media companies are pursuing strategies to attract and retain paying consumers. The paper discusses the implications of moves into media by so-called “supercompetitors” in the digital economy.
These companies use content to drive value to other parts of their businesses and in doing so create opportunities and challenges for the industry. The Forum argues for further study of the impact of these actions on the media landscape and the wider economy and calls for an examination of how regulation could be used to balance innovation, consumer welfare and corporate responsibility more effectively.
East Asia and Pacific: Countries Must Act Now to Mitigate Economic Shock of COVID-19
The virus that triggered a supply shock in China has now caused a global shock. Developing economies in East Asia and the Pacific (EAP), recovering from trade tensions and struggling with COVID-19, now face the prospect of a global financial shock and recession.
Sound macroeconomic policies and prudent financial regulation have equipped most EAP countries to deal with normal tremors. But we are witnessing an unusual combination of disruptive and mutually reinforcing events. Significant economic pain seems unavoidable in all countries. Countries must take action now – including urgent investments in healthcare capacity and targeted fiscal measures – to mitigate some of the immediate impacts, according to East Asia and Pacific in the Time of COVID-19, the World Bank’s April 2020 Economic Update for East Asia and the Pacific.
In a rapidly changing environment, making precise growth projections is unusually difficult. Therefore, the report presents both a baseline and a lower case scenario. Growth in the developing EAP region is projected to slow to 2.1 percent in the baseline and to negative 0.5 in the lower case scenario in 2020, from an estimated 5.8 percent in 2019. Growth in China is projected to decline to 2.3 percent in the baseline and 0.1 percent in the lower case scenario in 2020, from 6.1 percent in 2019. Containment of the pandemic would allow for a sustained recovery in the region, although risks to the outlook from financial market stress would remain high.
The COVID-19 shock will also have a serious impact on poverty. The report estimates that under the baseline growth scenario, nearly 24 million fewer people will escape poverty across the region in 2020 than would have in the absence of the pandemic (using a poverty line of US$5.50/day). If the economic situation were to deteriorate further, and the lower-case scenario prevails, then poverty is estimated to increase by about 11 million people. Prior projections estimated that nearly 35 million people would escape poverty in EAP in 2020, including over 25 million in China alone.
“Countries in East Asia and the Pacific that were already coping with international trade tensions and the repercussions of the spread of COVID-19 in China are now faced with a global shock,” said Victoria Kwakwa, Vice President for East Asia and the Pacific at the World Bank. “The good news is that the region has strengths it can tap, but countries will have to act fast and at a scale not previously imagined.”
Among the actions recommended by the report are urgent investments in national healthcare capacity and longer-term preparedness. The report also suggests taking an integrated view of containment and macroeconomic policies. Targeted fiscal measures – such as subsidies for sick pay and healthcare – would help with containment and ensure that temporary deprivation does not translate into long-term losses of human capital.
“In addition to bold national actions, deeper international cooperation is the most effective vaccine against this virulent threat. Countries in East Asia and the Pacific and elsewhere must fight this disease together, keep trade open and coordinate macroeconomic policy,” said Aaditya Mattoo, Chief Economist for East Asia and the Pacific at the World Bank.
The report calls for international cooperation and new cross-border public-private partnerships to ramp up the production and supply of key medical supplies and services in the face of the pandemic, and to ensure financial stability in the aftermath. Critically, trade policy should stay open so medical and other supplies are available to all countries, as well as to facilitate the region’s rapid economic recovery.
Another policy recommendation is easing credit to help households smooth their consumption and help firms survive the immediate shock. However, given the potential of an extended crisis, the report emphasizes the need to couple such measures with regulatory oversight, particularly as many countries in EAP already carry a high burden of corporate and household debt. For poorer countries, debt relief will be essential, so that critical resources can be focused on managing the economic and health impacts of the pandemic.
The report also highlights the substantially higher risk of falling into poverty among households dependent on sectors that are particularly vulnerable to COVID-19 impacts, such as tourism in Thailand and the Pacific Islands, manufacturing in Cambodia and Vietnam, and among households dependent on informal labor in all countries. In some countries, the impact of COVID-19 comes on top of country-specific factors, such as droughts (Thailand) or commodity shocks (Mongolia). In the Pacific Island countries, the outlook for 2020 is subject to substantial risks due to their economies’ reliance on grants, tourism, and imports.
Due to the COVID-19 pandemic, economic circumstances within countries and regions are fluid and change on a day-by-day basis. The analysis in the report is based on the latest country-level data available as of March 27.
The World Bank Group is rolling out a $14 billion fast-track package to strengthen the COVID-19 response in developing countries and shorten the time to recovery. The immediate response includes financing, policy advice and technical assistance to help countries cope with the health and economic impacts of the pandemic. The IFC is providing $8 billion in financing to help private companies affected by the pandemic and preserve jobs. IBRD and IDA are making an initial US$6 billion available for the health-response. As countries need broader support, the World Bank Group will deploy up to $160 billion over 15 months to protect the poor and vulnerable, support businesses, and bolster economic recovery.
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