Seizing the Opportunity for a Pro-Growth, Post-Pandemic World

Since March 2020, governments have spent $16 trillion providing fiscal support amid the pandemic, and global central banks have increased their balance sheets by a combined $7.5 trillion. Deficits are the highest they have been since World War II and central banks have provided more liquidity in the past year than in the past 10 years combined. This was absolutely necessary — IMF research indicates that if policymakers had not acted, last year’s recession, which was the worst peacetime recession since the Great Depression, would have been three times worse.

That’s where we’ve come from, but where are we headed? In the year ahead, as more vaccines roll off the production line, more people get jabbed, and more economies gradually reopen, policymakers need to engineer a fundamental shift from saving their economies from collapse, to strengthening their economies for the future with growth-oriented reforms.

We know that some pro-growth reforms were deferred, if not reversed, and some economic scarring has occurred. The world lost $22 trillion in output as a result of COVID-19, relative to what the IMF expected in January 2020. The same energy that is being put into vaccination and plans for recovery spending also needs to be put into growth measures to make up for this lost output.

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