COVID-19 in Low- and Middle-Income Countries—An (incomplete) Round Up

Simeon Djankov and Ugo Panizza, in partnership with the Center for Economic Policy Research (CEPR) and the International Development Policy Journal, have an edited volume on “COVID-19 in Developing Economies.” Aside from a questionable (at best) cover image, this seems to be a valuable resource. The included essays are short and will likely be helpful for many involved in policy-making or research in low- and middle-income countries. I will highlight a few chapters that I found particularly insightful.

Chapter 3: “Assessing COVID-19’s Economic Impact in Sub-Saharan Africa: Insights from a CGE Model” by Calvin Z. Djiofack, Hasan Dudu, and Albert G. Zeufack. 

The authors implement a CGE model to estimate the likely economic effect of COVID-19 in sub-Saharan Africa. Given the uncertainty with the severity of the pandemic in the region, the authors simulate three scenarios: (1) containment by July 2020… which is when this is being published, (2) a prolonged exposure through 2021, (3) a “worse case” scenario which combines scenario 2 with border closures within sub-Saharan Africa.

The results are not optimistic. In the authors’ own words, from the abstract:

The decline in regional GDP in 2020 relative to a reference scenario (where the pandemic never occurs) ranges from 5.7% in the relatively optimistic scenario to 7.65 in the pessimistic scenario. The pandemic would lower revenues from taxes and fees while raising spending, leading to a substantial deterioration in the fiscal deficit. Household income would plummet as labour force participation falls. The poor would be disproportionately affected, as many are employed in agriculture and low-end services, where output would fall sharply.

Chapter 8: “Behaviors, Perceptions and Mental Wellbeing in High-Income and Low/Middle-Income Countries at the Beginning of COVID-19 Pandemic” by Margarita Gomez, Andriy Ivchenko, Elena Reutskaja, and Pablo Soto-Mota.

The authors use data from the International Coronavirus Survey to explore how individuals have coped with the onset of COVID-19 around the world. This chapter finds evidence that individuals in low- and middle-income countries report less compliance with social distancing safety measures than in high-income countries. The abstract also suggests that “individuals in low- and middle-income countries express higher levels of worry and depression, with women being more worried and depressed than men.”

Those differences do not look huge in the figure above. People seem to be relatively worried and depressed all over the world. However, to the extent that COVID-19 actually caused a decrease in mental well-being, standard estimates of the effect of COVID-19 on economic outcomes (e.g., income, consumption, or poverty) may be underestimated. This conjecture is based, in part, on excellent work by Mo Alloush on the bi-directional relationship between economic and mental well-being.

Chapter 9: “Conflict in the Times of COVID-19” by Nicolas Berman, Mathieu Couttenier, Nathalie Monnet, and Rohit Ticku.

The authors analyze the spread of COVID-19 and the government policies aimed at reducing its spread on conflict around the world. The authors argue that, “imposing nation-wide shutdown policies diminishes conflict incidence on average, but that this conflict reduction may be short-lived and highly heterogeneous across countries.”

This conclusion pairs well with my paper (with Colette Salemi) entitled “COVID-19 and Conflict,” where our main contribution is an exploration of the heterogeneity across countries. Here is an excerpt from our conclusion:

We document critical heterogeneity in the relationship between COVID19, policy responses, and inter-group conflict across various contexts. In India, for example, protest events have declined but violence against civilians have increased since the beginning of the country’s national lockdown. In Syria, for another example, violent conflict has dramatically declined. By contrast, in Libya, violent conflict has dramatically increased. In other contexts, there is very little noticeable change in the rate of inter-group conflict events despite the implementation of nonpharmaceutical policy responses to the COVID-19 pandemic (e.g., the Philippines, Nigeria, or Iraq).

Chapter 12: “COVID-19 and Global Poverty: A Preliminary Assessment” by Giovanni Valensisi. 

In this chapter, the author aims to predict the effect of COVID-19 on global poverty, defined at different levels and disaggregated across geographic regions of the world. The results are discouraging, to say the least. Here is the author in their own words, from the abstract:

The analysis shows that the fallout of the pandemic will have dramatic consequences, eroding much of the gains recorded over the last few years in terms of poverty reduction. Our baseline case suggests that globally the number of people living below $1.90 per day poverty line could increase by at least 68 million in 2020. The fallout of the pandemic will also exacerbate the geographic concentration of poverty. This represents a significant setback and, absent effective support and international cooperation, will pose a critical threat to the achievement of the UN 2030 Agenda for Sustainable Development.

These estimates suggest that the COVID-19 pandemic will bring the number of people living in extreme poverty around the world to a level seen in 2017. We have lost three years of progress. The impact of COVID-19 on poverty is larger, however, when considering higher poverty lines.

The geographic distribution of the changes in the number of people living in poverty, of course, is not equitable. The figure above suggests that the majority of the increase in poverty will occur in Africa, the Middle East, and Southeast Asia.

Chapter 14: “Policy for Limiting the Poverty Impact of COVID-19 in Africa” by Gbetondji Melaine Armel Nonvide.

Okay, so what can policy-makers do about all of this (aside from limiting the extent of the spread of COVID-19)? In this chapter, the author discusses several policies that could potentially help limit an increase in poverty. These include cash transfer programs, expanded social assistance systems, and larger public work programs to offer job opportunities. Scaling up these sorts of programs will likely be a challenge since, as discussed in Chapter 3, the pandemic is expected to reduce revenues from taxes and fees. Therefore, implementing additional anti-poverty programs will require coordinated efforts from international donors and aid agencies.

There are many other chapters where authors argue for a particular set of policies that are most appropriate in a given context. These include discussions about protecting the recently unemployed or those at risk of becoming unemployed in emerging markets (chapter 16), the ability of individuals to work from home in low- and middle-income countries (chapter 17), protections on exporting firms (chapter 18) and considerations for early childhood education (chapter 21) and supply chains (chapter 22). Finally, the last section of the book devotes itself to discussions about financing policy responses and the recovery. These are important discussions and represent just the beginning of this work.