The COVID-19 pandemic continues to exact a toll on the global economy, and Liberia is facing its dire human and economic impact, with real GDP projected to contract by 2.6 percent in 2020, according to the first Liberia Economic Update.
The report shows that the human cost of COVID-19 could be high. The population living below the national poverty line is expected to increase from 55.5 percent in 2019 to 68.9 percent, which means that an additional 526,000 Liberians are at risk of falling into poverty. The authors also warn that economic growth could further slowdown if government’s policy response is delayed, not well-targeted, or if the external environment does not improve significantly this year.
“The World Bank welcomes efforts by the Liberia authorities to manage the community spread of COVID-19, building on the lessons from the Ebola experience,” said Pierre Laporte, World Bank Country Director for Ghana, Liberia and Sierra-Leone. “We recognize that mitigating the impact of the COVID-19 pandemic on the Liberian economy poses a complex and evolving challenge. Together with other development partners, we are supporting the government through financing and technical advice to address the crisis and transition to a robust economic recovery”.
Liberia’s near-term outlook is highly uncertain. Under the baseline scenario, a sharp rebound is expected with real GDP growth projected to rise to an average of 4.1 percent during 2021-22. However, under the downside scenario, real GDP is expected to recover more slowly, growing at an average rate of 3.7 percent in 2021-22. In both scenarios, the medium-term recovery will be underpinned by the post-COVID-19 normalization of economic activity and the implementation of structural reforms designed to alleviate constraints on productivity growth and support economic diversification.
“While the medium-term outlook is highly uncertain, there is cause for cautious optimism, said Khwima Nthara, World Bank Country Manager for Liberia. “Successful containment of the outbreak and implementation of the right mix of policies could position Liberia to benefit from an accelerating global recovery. Under such scenario, it will be important to ensure that the benefits of the recovery are widely shared through interventions that target the poor.”
The report proposes policy options in four critical areas that can help Liberia lay the foundation for the recovery in the immediate and short-term: (i) scaling up social protection programs; (ii) ensuring continued access to education; (iii) promoting the continuation of essential trade and market activities; and (iv) supporting financial-sector development to bolster the response to COVID-19.
In addition, the report argues that productivity-driven growth and diversification will be central to Liberia’s post-pandemic recovery and highlights the importance of putting in place fiscal consolidation measures.
“An increase in official development assistance will temporarily bolster the government’s resources and provide the liquidity necessary to address urgent spending needs, and to maintain essential government services,” said Marina Bakanova, World Bank Senior Economist and the Lead author of the report.
The report also notes the importance of strengthening statistical capacity to promote evidence-based policy making and help monitoring the impact of COVID-19.
Drops in Health Spending Jeopardize Recovery from COVID-19 in Developing Countries
Despite what will likely be the fastest economic growth in the aftermath of any recession in the last 80 years, 52 countries are expected to reduce per capita government spending below pre-COVID levels over the next five years. Based on a new World Bank paper released today, this will leave them unable to finance their share of a COVID-19 vaccine roll-out, invest in better preparedness to protect themselves from future crises and make progress toward Universal Health Coverage.
According to “From Double Shock to Double Recovery: Widening Rifts,” governments will have to make bold choices to avoid falls in government health spending. In a group of 126 countries, per capita government spending is projected to exceed pre-COVID levels by 2026. In 52 countries, by that time, overall government spending will however remain below 2019 levels. A return to pre-COVID-19 growth rates in per capita government health spending in the poorest of these countries would require the share of spending assigned to health to almost double, from 10 percent to 20 percent.
“The economic shock from Covid-19 is threatening the capacity of governments to spend sufficiently on health, threatening COVID-19 recovery and health security for all,” said Mamta Murthi, World Bank Vice President for Human Development. “Cash-strapped countries will have to make tough choices in health investment to safeguard essential health services, stay on a path toward Universal Health Coverage, and build resilience for the future.”
While bringing the current pandemic to an end will require significant investments in vaccines and vaccination programs, countries must also build resilience by investing in preparedness and ensure affordable health services for their populations, especially poor people. Yet, according to the paper, this is becoming a near impossibility for some countries.
“The projected net growth in health spending during 2021 and 2022 will cover only 28 percent of the countries’ cost share of a vaccine roll out in low-income countries, and 43 percent in lower-middle income countries,” said Christoph Kurowski, lead author of the paper. “And the projected growth in government health spending in these countries by 2026 will cover approximately only 60 percent of the necessary annual investment to strengthen and maintain public-health preparedness and response capabilities.”
The Global Financing Facility (GFF), which supports the continuity of essential health services as part of COVID-19 response efforts, has been sounding the alarm of the secondary health crisis for vulnerable populations and the need to secure appropriate levels of financing to provide essential health services and respond to emergencies in the future.
While it won’t be easy to boost development assistance for health at a time when high-income countries are also struggling, they have a vital interest in supporting a global recovery. Progress toward Universal Health Coverage is critical for human capital development and a full return to inclusive growth everywhere. Only together, can countries bridge the health financing rifts to build a healthier, more secure, more prosperous future for all.
Iraq and the World Bank to Boost Iraqi Women’s Economic Empowerment
A new plan to remove constraints and create more economic opportunities for women was launched today by the government of Iraq, with support from the World Bank Group.
The Women’s Economic Empowerment Plan for 2021-2022 outlines the government’s priorities in line with its reform program. The plan follows extensive consultations with key stakeholders and is supported by the Iraqi Ministry of Planning, the Women’s Empowerment Directorate in the General Secretariat of the Council of Ministers, and the High Council for Women’s Affairs in Kurdistan Region of Iraq.
The World Bank Group provided technical support and advice to the government to develop the plan. Key pillars include building capacity for a more gender responsive budget, developing women’s skills in the digital and agriculture sectors; boosting access to finance for women; increasing data related to women in the private and informal sectors; implementing legislative reforms to reduce gender gaps; and strengthening knowledge and capacity around access to childcare.
The plan also includes a special focus on supporting vulnerable groups of women and targeting internally displaced women and returnees to areas liberated from ISIS.
On the launch of the plan, Dr. Yussra Kareem, National Coordinator of the MGF in Iraq and Director General for Women’s Empowerment Directorate at the General Secretariat of the Council of Ministers, said: “Women’s economic empowerment is one of the most important pillars focused on by the general policy for women’s empowerment, and it comes in the context of women’s rights to equality and social justice, and the 2030 sustainable development plan. In light of this, the Advisory Committee for Women’s Economic Empowerment, in cooperation with the World Bank, developed the National Action Plan for 2021-2022 for women’s economic empowerment and identified its six priorities.”
“Iraqi women have proved to be strong and resilient throughout decades of economic and security challenges. Increasing the participation of Iraqi women in the policy-making process and in leading roles is key to promote peacebuilding and social development.” said Saroj Kumar Jha, the World Bank’s Mashreq Regional Director. “The World Bank Group stands ready to support Iraq in strengthening the enabling environment for women’s economic participation and improving women’s access to economic opportunities.”
“More women in the Iraqi workforce means more growth and less poverty. IFC is working with the private sector to help remove barriers that hold women back from joining the workforce,” said Abdullah Jefri, IFC’s Manager for the Levant.
“Building a resilient economic recovery and ensuring inclusive long-term growth requires the full and equal participation of women in the economy. Canada continues to support Iraq in their efforts to strengthen women’s economic empowerment and welcomes the launch of this workplan under the Mashreq Gender Facility to help address the barriers to women’s participation in the labour force and enhance their opportunities to succeed,” said H.E Ulric Shannon, Ambassador of Canada to Iraq.
“Sustainable development in any country cannot be achieved if women are not included in economic life and in political decision-making bodies. To ensure women participation in the labour market is smart economics, and this requires active and tireless efforts over time. The launch of the Woman Economic Empowerment Workplan 2021-2022 today is a step in the right direction, and Norway is proud to support the Mashreq Gender Facility in these vital efforts,” said H.E Erik Burger Husem, Chargè d’affaires at the Norwegian Embassy in Iraq.
The new plan will be implemented with support from national and international civil society organizations, and the private sector, in close coordination with the World Bank Group and international development partners.
The plan is a joint effort between the government of Iraq and the World Bank Group under the Mashreq Gender Facility (MGF), launched in January 2019 by the World Bank Group with financial support from the governments of Canada and Norway. The facility provides technical support to Iraq, Lebanon and Jordan to boost women’s economic participation and drive inclusive growth. Under the MGF, Iraq set the target of increasing female labor force participation of 5 percentage point by 2024.
More efforts needed to boost trust in AI in the financial sector
Governments, financial regulators and firms should step up their efforts to work together to address the challenges of developing and deploying trustworthy artificial intelligence (AI) in the financial sector, according to a new OECD report.
The OECD Business and Finance Outlook 2021 says that investment in AI finance is on the rise. The financial and insurance sector has consistently been within the top 10 industries in terms of the amount of VC investments in AI start-ups, investing over USD 4 billion worldwide in 2020. Almost 65% of VC investments in the sector went to American AI start-ups.
As AI applications become increasingly integrated into business and finance, the use of trustworthy AI will become increasingly important for ensuring trustworthy financial markets, says the report.
AI has the potential to facilitate transactions, enhance market efficiency, reinforce financial stability, promote greater financial inclusion and improve customer experience. But AI also raises unique challenges to privacy, autonomy, transparency and accountability, which are particularly complex in the financial sector, according to the Outlook.
Critically, increasingly complex AI algorithms that are difficult, or even impossible, to explain could amplify existing risks in financial markets or give rise to new risks.
Transparency, fairness, data governance and accountability are key to managing risk as determinants of trustworthy AI. Failing to foster these qualities in AI systems could lead to the introduction of biases generating discriminatory and unfair results, market convergence and herding behaviour or the concentration of markets by dominant players, which can all undermine market integrity and stability.
Existing financial regulations may fall short of addressing systemic risks presented by wide-scale adoption of AI-based FinTech by financial firms, says the report.
These conditions have led to a critical juncture for the deployment of AI applications in business and finance, according to the Oulook. Financial regulators are grappling with whether and how to adapt existing rules, or create new ones, to keep pace with technological advances in AI applications, while striking the right balance between managing risks and supporting innovation.
At the international level, the OECD AI Principles, adopted in May 2019, became the first international standard agreed by governments for the responsible stewardship of trustworthy AI. The OECD, together with international partners working to support financial markets and financial sustainability, must reinforce efforts to facilitate multilateral engagement on implementing the Principles in the context of financial markets and other business sectors.
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