Mitigating the Economic Impacts of Epidemics and Financial Crises: Focus on Middle-income Countries

This report looks at lessons learned from efforts to mitigate the negative economic impacts of prior epidemics and the COVID-19 pandemic, and financial crises. The focus is on inclusive growth measures and geographically on middle-income countries, although lessons are also drawn from and applicable to lower- and higher-income countries. Policy and programme interventions implemented to mitigate the economic impact of epidemics and financial crises fall under: health and preparedness, monetary policy and support to the financial sector and fiscal policy and social protection. Investing in health capacity and pandemic preparedness is one of the most productive investments for health and for inclusive economic growth. Also, it is generally recommended that international trade should be preserved during epidemics, with policies that address short- and long-term trade. During the global financial crisis, central banks throughout the world mitigated the impacts of the crisis, including a decline in output and trade flows, with expansionary monetary policies. In the case of the COVID-19 crisis, monetary policy has been less effective, unlike during the 2008 financial crisis, as the main shock is coming from the real economy, rather than the financial sector. Fiscal policy will, therefore, play a greater role.