The Global Economic Crisis Induced by the Covid-19 Pandemic in Historical Perspective
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•
The economic crisis induced by the
Covid-19 pandemic stands out in term
of its global scale, scope, and severity
•
In 2020, 95 percent of all countries
experienced negative output growth.
More than in the Great Depression or
both World Wars
•
The crisis is unique in its nature: unlike
previous crises, it did not originate as
a crisis in the government or financial
sector. Self-induced supply shock that
affects households and firms
•
Poverty increased for the first time in
a generation, generating 100 million
new poor in 2020
•
Impacts of the crisis highly regressive
within and between countries
1
1st Annual Central Bank Conference on Development Economics
in the Middle East and North Africa
Board Meeting
December 2, 2021
WDR22 Conceptual Framework
2
World Development Report 2022:
Finance for an Equitable Recovery
WDR22 Conceptual Framework
3
World Development Report 2022:
Finance for an Equitable Recovery
WDR22 Conceptual Framework
4
World Development Report 2022:
Finance for an Equitable Recovery
WDR22 Conceptual Framework
5
World Development Report 2022:
Finance for an Equitable Recovery
Policy Area 1:
Resolving loan distress
Risk
:
High ratio of non-performing loans impair credit intermediation;
Delayed action increases
costs and compromises the capacity of banks to finance the recovery
6
World Development Report 2022:
Finance for an Equitable Recovery
Policy Area 1:
Resolving loan distress
Risk
:
High ratio of non-performing loans impair credit intermediation;
Delayed action increases costs and
compromises the capacity of banks to finance the recovery
Policy Area 2:
Restructuring firm and household debt
Risk:
High NPL rates that lead to widespread debt distress, “zombie firms”, mass bankruptcy
filings, and government interference in debt resolution; Delayed action can cut off access to credit,
destroy jobs, and discourage entrepreneurship
7
World Development Report 2022:
Finance for an Equitable Recovery
Policy Area 1:
Resolving loan distress
Risk
:
High ratio of non-performing loans impair credit intermediation;
Delayed action increases costs and
compromises the capacity of banks to finance the recovery
Policy Area 2:
Restructuring firm and household debt
Risk:
High NPL rates that lead to widespread debt distress, “zombie firms”, mass bankruptcy filings,
government interference in debt resolution; Delayed action can cut off access to credit, destroy jobs, and
discourage entrepreneurship
Policy Area 3:
Ensuring continued access to finance
Risk:
Lenders stop issuing credit –
especially for perceived higher-risk groups
– because traditional
ways to measure risk and establish recourse in the event of default are less effective
8
World Development Report 2022:
Finance for an Equitable Recovery
Spotlights:
Focus on inclusive and sustainable finance
-
Financial inclusion and financial resilience
-
Strengthening the regulation and supervision of microfinance
-
Supporting MSMEs and informal businesses through recovery requires concerted efforts to
support MFIs
-
Public credit guarantees to support MSME’s, designed to mitigate the risks of moral hazard,
politicization
-
Greening of capital markets: Issuance of sovereign sustainable bonds
9
World Development Report 2022:
Finance for an Equitable Recovery
Spotlights:
Focus on inclusive and sustainable finance
-
Financial inclusion and financial resilience
-
Strengthening the regulation and supervision of microfinance
-
Supporting MSMEs and informal businesses through recovery requires concerted efforts to
support MFIs
-
Public credit guarantees to support MSME’s, designed to mitigate the risks of moral hazard,
politicization
-
Greening of capital markets: Issuance of sovereign sustainable bonds
10
World Development Report 2022:
Finance for an Equitable Recovery
Policy Area 1:
Resolving loan distress
Risk
:
High ratio of non-performing loans impair credit intermediation;
Delayed action increases costs and
compromises the capacity of banks to finance the recovery
Policy Area 2:
Restructuring firm and household debt
Risk:
High NPL rates that lead to widespread debt distress, “zombie firms”, mass bankruptcy filings,
government interference in debt resolution; Delayed action can cut off access to credit, destroy jobs, and
discourage entrepreneurship
Policy Area 3:
Ensuring continued access to finance
Risk:
Lenders stop issuing credit –
especially for perceived higher-risk groups
– because traditional ways to
measure risk and establish recourse in the event of default are less effective
Policy Area 4:
Managing high levels of sovereign debt
Risk:
Delays in addressing elevated sovereign debt are associated with protracted recessions and
high inflation, which have disproportionate negative effects on the poor
11
World Development Report 2022:
Finance for an Equitable Recovery
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The economic crisis triggered by the Covid-19 pandemic in 2020 had far-reaching global implications, with 95% of countries experiencing negative output growth. Unlike past crises, this crisis stemmed from a self-induced supply shock, impacting households and firms worldwide. The pandemic led to a rise in poverty levels and exacerbated inequalities within and among nations. The World Development Report 2022 emphasizes the need for equitable financial strategies to address loan distress and debt restructuring in order to facilitate a sustainable recovery.
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Presentation Transcript
The Covid The Covid- -19 crisis in historical perspective 19 crisis in historical perspective The economic crisis induced by the Covid-19 pandemic stands out in term of its global scale, scope, and severity In 2020, 95 percent of all countries experienced negative output growth. More than in the Great Depression or both World Wars The crisis is unique in its nature: unlike previous crises, it did not originate as a crisis in the government or financial sector. Self-induced supply shock that affects households and firms Poverty increased for the first time in a generation, generating 100 million new poor in 2020 Impacts of the crisis highly regressive within and between countries 1st Annual Central Bank Conference on Development Economics in the Middle East and North Africa Board Meeting December 2, 2021 1
World Development Report 2022: Finance for an Equitable Recovery WDR22 Conceptual Framework 2
World Development Report 2022: Finance for an Equitable Recovery WDR22 Conceptual Framework 3
World Development Report 2022: Finance for an Equitable Recovery WDR22 Conceptual Framework 4
World Development Report 2022: Finance for an Equitable Recovery WDR22 Conceptual Framework 5
World Development Report 2022: Finance for an Equitable Recovery Policy Area 1: Resolving loan distress Risk: High ratio of non-performing loans impair credit intermediation; Delayed action increases costs and compromises the capacity of banks to finance the recovery 6
World Development Report 2022: Finance for an Equitable Recovery Policy Area 1: Resolving loan distress Risk: High ratio of non-performing loans impair credit intermediation; Delayed action increases costs and compromises the capacity of banks to finance the recovery Policy Area 2: Restructuring firm and household debt Risk: High NPL rates that lead to widespread debt distress, zombie firms , mass bankruptcy filings, and government interference in debt resolution; Delayed action can cut off access to credit, destroy jobs, and discourage entrepreneurship 7
World Development Report 2022: Finance for an Equitable Recovery Policy Area 1: Resolving loan distress Risk: High ratio of non-performing loans impair credit intermediation; Delayed action increases costs and compromises the capacity of banks to finance the recovery Policy Area 2: Restructuring firm and household debt Risk: High NPL rates that lead to widespread debt distress, zombie firms , mass bankruptcy filings, government interference in debt resolution; Delayed action can cut off access to credit, destroy jobs, and discourage entrepreneurship Policy Area 3: Ensuring continued access to finance Risk: Lenders stop issuing credit especially for perceived higher-risk groups because traditional ways to measure risk and establish recourse in the event of default are less effective 8
World Development Report 2022: Finance for an Equitable Recovery Spotlights: Focus on inclusive and sustainable finance - Financial inclusion and financial resilience - Strengthening the regulation and supervision of microfinance - Supporting MSMEs and informal businesses through recovery requires concerted efforts to support MFIs - Public credit guarantees to support MSME s, designed to mitigate the risks of moral hazard, politicization - Greening of capital markets: Issuance of sovereign sustainable bonds 9
World Development Report 2022: Finance for an Equitable Recovery Spotlights: Focus on inclusive and sustainable finance - Financial inclusion and financial resilience - Strengthening the regulation and supervision of microfinance - Supporting MSMEs and informal businesses through recovery requires concerted efforts to support MFIs - Public credit guarantees to support MSME s, designed to mitigate the risks of moral hazard, politicization - Greening of capital markets: Issuance of sovereign sustainable bonds 10
World Development Report 2022: Finance for an Equitable Recovery Policy Area 1: Resolving loan distress Risk: High ratio of non-performing loans impair credit intermediation; Delayed action increases costs and compromises the capacity of banks to finance the recovery Policy Area 2: Restructuring firm and household debt Risk: High NPL rates that lead to widespread debt distress, zombie firms , mass bankruptcy filings, government interference in debt resolution; Delayed action can cut off access to credit, destroy jobs, and discourage entrepreneurship Policy Area 3: Ensuring continued access to finance Risk: Lenders stop issuing credit especially for perceived higher-risk groups because traditional ways to measure risk and establish recourse in the event of default are less effective Policy Area 4: Managing high levels of sovereign debt Risk: Delays in addressing elevated sovereign debt are associated with protracted recessions and high inflation, which have disproportionate negative effects on the poor 11
Thank you. Thank you. Further questions or comments are welcome Further questions or comments are welcome - - please email lklapper@worldbank.org lklapper@worldbank.org please email 12
