A new policy toolkit is needed as countries exit covid 19 lockdowns

When it became clear that the COVID-19 pandemic required widespread lockdown of all but essential firms, most governments took measures to protect vulnerable workers and firms from the worst effects of the sudden drop in activity. These measures included unemployment benefits, grants, transfers, loans at low rates, and tax deferrals. Their nearly exclusive focus was protection.

As some of these measures come to an end, and as it becomes clear that some sectors will have to contract and others expand, the focus must progressively shift, incentives must be given to firms and workers to resume activity, and when needed to adjust. Debt inherited from the freeze must be restructured if unsustainable. But policymakers must also consider the consequences of heightened uncertainty about the course of the pandemic and the economy, and the large increase in the number of workers out of work. As governments in advanced economies move from freeze to exit, they must design measures that will limit the pain of adjustment. This Policy Brief explores how such measures can be designed.

Categories: Recommended Readings
Author: PIIE