INTRODUCTION

The Covid-19 pandemic was, first and foremost, a human tragedy. Most countries prioritized public health and launched various measures—chiefly lockdowns, social distancing and workplace closures—to reduce the spread of the virus. These policies resulted in unprecedented economic impacts on individuals and businesses: access to essential services, food and livelihoods was disrupted, economic activity slowed, firms defaulted and jobs were lost.

Countries also responded with decisive economic policies to cushion the short-term human costs of the downturn induced by the pandemic response. Global fiscal support of US$14 trillion contributed to saving lives and livelihoods and mitigated the effects of the pandemic on consumption and output. Fiscal response, nonetheless, varied greatly across countries, from 2 per cent of gross domestic production (GDP) in Egypt to 46 per cent in Italy (World Bank 2022b). Combined with the economic contraction that caused lower revenues, such support led to a rise in national deficits and public debt. Government budget deficits for 2020 were projected at 13.3 per cent for advanced economies, 10.3 per cent for emerging market and middle-income economies and 5.7 per cent for low-income developing countries (ibid.). Global public debt soared to an estimated 98 per cent of GDP at the end of 2020, compared with 84 per cent in 2019 (Gaspar et al. 2021; World Bank 2022b). Despite the decisive economic policy responses, together with a massive amount of fiscal stimulus, the world experienced the largest global economic crisis in more than a century (World Bank 2022b).

A wide range of policy measures were introduced to confront the short-term impacts of the pandemic. These included direct income support programmes, temporary debt relief (i.e., debt moratoriums for households and businesses, regulatory forbearance for banks) and tax breaks for firms and individuals. These measures were introduced differently across countries, depending on the availability of resources and the specific nature of risks each country faced. In the context of developing countries, implementing these measures was in some cases challenging as social safety net schemes are nascent. Further, developing-country governments also often lack basic information that would allow them to identify and reach the vulnerable and those eligible for support during a crisis, thereby hindering policy efforts. As a result, the magnitude of fiscal resources spent by a country during the crisis might not be a reliable indicator of the impact of Covid-19 on its economy.