## pataceea — Introduction

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---

### Adjusting to the COVID-19 shock
- Focus areas: (1) adjusting to the COVID-19 shock, (2) using unconventional policies when policy space is limited, (3) dealing with debt, and (4) helping the vulnerable and greening the recovery.
- Key lessons from Chapter 1 on containment and reopening:
  - "Activate containment measures early, when infection rates are still low, to flatten the virus curve and reduce the depth and duration of the economic downturn."
  - "Exiting lockdowns after the virus has been suppressed leads to better health and economic outcomes; a sequenced approach prioritizing essential sectors and reopening regions based on forward-looking risk assessments can reduce economic costs while minimizing health risks (China’s experience cited)."
  - "A comprehensive testing and tracing system can minimize the risk of second waves."
- Medium-term scarring and reallocation (Chapter 2):
  - "The pandemic triggers a severe global recession with likely long-lasting effects."
  - Examples: Australia and New Zealand show a large and persistent decline in potential output across several scenarios.
  - Policy priorities: "step up economic reforms to boost productivity growth and investment, allow adequate reallocation of resources across sectors, and support workers affected by transition."
- Tourism impact (Chapter 3):
  - "Tourism accounts for more than 10 percent of the global economy and is a major employer of youth and women."
  - Tourism-dependent countries face larger scarring from services requiring in-person contact; policy and reform responses needed to mitigate output and job losses and facilitate sector transition.
- Technological decoupling risks (Chapter 4):
  - COVID-19 could accelerate China–US trade and technology tensions and permanently reshape global value chains and international investment flows.
  - Alternative decoupling scenarios studied: China–US decoupling, China–OECD decoupling, and a multipolar world of three technology hubs decoupled from one another — all show significant losses for most countries.
  - "Findings underscore the role of trade cooperation as a global public good."

### Unconventional policies when policy space is limited
- Fiscal and monetary policy support in Asia was significant, but many emerging market and developing economies are running out of policy space.
- Financial sector measures in South Asia (Chapter 5):
  - Measures included debt service moratoria, targeted lending schemes, and liquidity support.
  - Short-term relief was appropriate, but policymakers should "modify measures to minimize distortions and define clear exit strategies to avoid aggravating vulnerabilities."
- Unconventional monetary policies (UMPs) in Emerging Asia (Chapter 6):
  - ASEAN-4 experience (Indonesia, Malaysia, Philippines, Thailand): Malaysia and Thailand used central bank lending operations to provide extra liquidity to firms; Indonesia and the Philippines used large-scale asset purchases.
  - "The turn to UMPs in emerging economies was unexpected and entails risks that grow with prolonged use; steps needed include establishing frameworks delineating UMP use."
- Japan’s Yield Curve Control (YCC) lessons (Chapter 7):
  - "The Bank of Japan pegged the 10-year Japanese government bond (JGB) yield at about zero percent in September 2016."
  - Trade-offs: "choice of YCC target horizon balances stimulating the economy versus exposing the central bank’s balance sheet to risk, and between maintaining price inflation and financial stability."
  - "Exiting YCC smoothly is challenging; poor communication of normalization could trigger a government bond market sell-off."

### Dealing with debt
- Post-pandemic debt burdens will be a major issue for some countries.
- Pacific island countries (Chapter 8):
  - Balancing pandemic recovery, rebuilding fiscal buffers, and investing in climate resilience may prove too much for some Pacific island economies.
  - "Debt relief or debt reduction may be required to free resources for health, education, social protection, and improved public debt management."
- Corporate sector indebtedness and insolvency risks (Chapters 9–10):
  - "Many ASEAN firms entered the pandemic with a record-high debt service burden."
  - "Close to half of sample firms unable to generate enough earnings to cover their interest payments falling due in 2020."
  - Policy recommendations:
    - "Re-orient support to viable firms with liquidity shortages."
    - "Prepare for an orderly phasing-out of exceptional support measures."
    - "Strengthen insolvency systems and frameworks to 'flatten the insolvency curve.'"
    - "Ensure availability of adequate financing and facilitate access to risk capital to speed up reallocation of resources into growth sectors."
    - "Revitalize firm dynamism and reinforce social protection."

### Helping the vulnerable and building a sustainable future
- Labor market impacts and inequality (Chapter 11):
  - "Unemployment surged and labor force participation plunged; job losses concentrated in lower-wage industries and among women and youth."
  - "The pandemic may increase inequality in the medium term, especially if it accelerates displacement of low-skilled workers through automation and robotization."
  - "Higher inequality could lead to a significant increase in social unrest."
  - Model-based analysis suggests targeted policies can mitigate adverse distributional consequences while supporting economic activity and virus containment.
- Unemployment support and social protection (Chapter 12):
  - "The pandemic exposed gaps in social protection and exacerbated inequality across advanced and emerging Asia."
  - The chapter reviews government responses and explores whether more should be done to support the unemployed.
  - Challenges in expanding social safety nets: capacity, coverage, incentives, and fiscal sustainability.
- Green recovery opportunities (Chapter 13):
  - "A well-designed carbon tax package and complementary product and labor market policies could support capital reallocation and labor reskilling."
  - "South Asia may be uniquely placed to accelerate mitigation efforts through inclusive carbon taxes."
  - Potential benefits: limit climate change, improve local health, boost fiscal revenues, and support the region’s role as one of the world’s largest carbon-dioxide emitters.

### Key statistics and time references (verbatim)
- "1.5 to 2 percent of GDP in additional fiscal revenues by 2030."
- Reference to "2019 Fiscal Monitor."
- Example target year: "Canada by 2030."

*Chang Yong Rhee and Katsiaryna Svirydzenka — Introduction to Policy Advice to Asia in the COVID-19 Era*

---

### Constructing Containment Indices and Containment Strategies in Asia

### Constructing Containment Indices
- Sample covers "Australia, China, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Thailand, and Vietnam" for the period "January 1–September 9, 2020."
- Developed a de jure narrative stringency index capturing government-imposed restrictions related to six sectors: schools, retail, services, industry, gatherings and public events, and international travel.
- Sources: survey of IMF economists and publicly available sources such as the ACAPS Government Measures Dataset, government press releases, and news sources.
- Advantages over other public indices:
  - More granular view by distinguishing between key economic sectors (services, industry, retail).
  - Greater granularity for China by constructing the index at the province level.

### Containment strategies — timing, stringency, and outcomes
- Timing and sequencing:
  - "On average, Asian countries tightened domestic restrictions five days after a significant outbreak (defined as 100 cumulative cases)."
  - "Indonesia waited 25 days to tighten restrictions."
  - "International travel restrictions were generally imposed first, followed by school closures."
- Stringency and duration:
  - Several countries imposed near-complete lockdowns for more than a month ("Malaysia, New Zealand, Philippines").
  - Other countries closed only nonessential services while allowing industrial sectors to continue operating ("Australia, Thailand, Vietnam").
  - "Korea did not implement mandatory shutdowns; instead issued strong recommendations, relied on voluntary social distancing, and used comprehensive testing and tracing."
- Effectiveness variations:
  - Restrictions are generally more effective when implemented early.
  - Implementation and enforcement challenges—especially in densely populated emerging markets with higher informality and poverty—may have reduced effectiveness ("India, Indonesia, Philippines").
  - Limited health care capacity, including testing and tracing, affected effectiveness; some countries ramped up testing and tracing, while others lagged ("Indonesia, Philippines").
- Reopening patterns:
  - "Most eased restrictions when new cases were more than 80 percent below peak levels."
  - Australia, Japan, and Malaysia experienced substantial second waves; China, Korea, New Zealand, and Vietnam had smaller outbreaks largely contained.
  - Some countries reopened before infection rates fell significantly and experienced increases in cases ("India eased while cases were still rising; Indonesia and the Philippines reopened without virus suppression").
- Pace of reopening:
  - Slower in early openers ("Indonesia, India, Philippines"), with many sectors remaining partially closed.
  - Countries that waited until cases subsided have continued easing and many sectors are now completely open or operating with enhanced health protocols.
  - Some adopted a sequential approach reopening lower-risk regions or sectors first and used localized lockdowns to control clusters ("China, Vietnam").

### Economic and health-policy linkages after reopening
- Economic recovery:
  - "Average purchasing managers’ indexes (PMIs) in the second half of 2020 remain significantly below pre-COVID-19 levels in India, Indonesia, and the Philippines."
  - PMIs recovered or surpassed pre-COVID-19 levels in most countries that reopened after suppressing the virus.
- Health measures:
  - "Testing and contact tracing have been important in mitigating spread after exiting lockdowns."
  - Increases in mobility after lifting lockdowns led to new clusters in some countries that had suppressed the virus, causing second waves ("Australia, Japan, Malaysia").
  - Effective testing, tracing, and quarantining systems helped detect and contain clusters before widespread community transmission ("China, Korea, New Zealand, Vietnam").
  - "Vietnam quarantined all close contacts of positive cases."
  - "China and Korea used technology and big data to improve contact tracing efficiency and perform granular risk assessment."
  - Localized lockdowns were used in hot spots to prevent further spread.

### Lessons from Asia’s Experience (verbatim takeaways)
- "(1) activate containment measures early, when infection rates are still low;"
- "(2) exit lockdowns after the virus has been suppressed for better health and economic outcomes;"
- "(3) put in place comprehensive testing and tracing systems to minimize the risk of second waves."

---

### Addressing the Pandemic’s Medium-Term Fallout in Australia and New Zealand

### Near-term impact and historical context
- "Second quarter of 2020 GDP decline: 7.0 percent in Australia and 9.5 percent (expenditure side) in New Zealand."
- Historical recession scarring:
  - "On average, five years after the start of a recession, output is about 4¾ percent below its precrisis trend in advanced economies."
  - "Severe recessions (often with financial crises) show output about 11 percent below pre-recession trend five years on."

### Channels of scarring and quantitative projections
- Labor supply and sectoral reallocation:
  - "Estimates indicate an increase in structural unemployment of about 0.6–0.8 percentage point in the medium term."
  - "Immigration, responsible for about 60 to 70 percent of recent population increases in both countries, has fallen due to border closures and is likely to take several years to fully recover."
- Capital accumulation:
  - "Projections point to a decline in the capital stock by about 5–6 percent relative to the pre-COVID trend."
- Productivity:
  - "On net, projections point to a further decline in medium-term productivity by about 1.5 percent compared to the pre-COVID trend."
- Projected impact on potential output by 2025 relative to precrisis projections:
  - Australia: "within a range of 2¾ to 7¼ percent below precrisis projections."
  - New Zealand: "within a range of 3¾ to 8½ percent below precrisis projections."

### Policy guidance
- Short term: Maintain "vigorous fiscal and monetary stimulus until the recovery is well-entrenched to support demand and limit medium-term scarring."
- Medium term:
  - "Shift focus to reforms that boost productivity growth and investment, allow adequate reallocation of resources across sectors, and support workers affected by the transition."
  - "Gradually replace wage subsidies with well-targeted hiring subsidies and adequate unemployment benefits."
  - Emphasize retraining displaced workers, prioritize infrastructure upgrades (including green investments and the digital economy), and reform to simplify business processes and reduce regulatory and tax burdens.

---

### The Future of Tourism in the Post-Pandemic World

### Context and impact
- Tourism metrics:
  - "Tourism is a major economic driver, accounting for more than 10 percent of the global economy."
  - "On average, tourism directly accounts for about 3½ percent of global GDP; the total contribution (direct, indirect, and induced) is estimated to extend to more than 10 percent of global GDP."
- Distributional effects: "Informal and migrant workers, particularly women and youths, have been disproportionately affected."
- Empirical and model findings:
  - "Impacts of epidemics on tourism flows are much greater in developing countries than in advanced economies."
  - Forward-looking simulations show scope for faster recovery if rapid vaccine distribution returns travel to pre-pandemic levels, but significant downside risks from protracted uncertainty and limited vaccine effectiveness and availability.

### Policy options (phased)
- Phase 1, crisis mitigation:
  - Fiscal support to buttress demand and preserve jobs; "further support may be needed."
  - "Well-designed fiscal stimulus can support the most affected sectors including the poorest households and businesses, while being mindful of fiscal space and debt sustainability."
- Phase 2, reopening:
  - "Devote special attention to health and hygiene protocols as economies and borders reopen."
  - Domestic tourism is being incentivized; "Creation of COVID-free travel bubbles shows potential despite implementation challenges."
  - Targeted policies for youth and women and timely restructuring and retooling for SMEs to avoid insolvency.
- Phase 3, recovery:
  - "Shift toward eco-sustainable tourism services with lower density, higher value-added, and greater digitalization."
  - Use the juncture to accelerate long-term structural transformation; "Global cooperation is required, starting with establishing global safety and health protocols and making a reliable vaccine widely available."

---

### Technological Decoupling Scenarios and Implications

### Scenario definitions (verbatim)
- "Scenario 1: China-US w/o preferential attachment"
- "Scenario 2: China-US with preferential attachment"
- "Scenario 3: China-OECD w/o preferential attachment"
- "Scenario 4: China-OECD with preferential attachment"
- "Scenario 5: China-US-Germany w/o preferential attachment"
- "Scenario 6: China-US-Germany with preferential attachment"

### Channels of impact analyzed
- Short- and long-term trade channel: higher non-tariff barriers depress demand for high-tech imports, compounded by investment and consumption responses to permanent income losses.
- Long-term output impact due to sectoral misallocation: quantified using a sectoral computable general equilibrium trade model.
- Dynamic losses from lower cross-border knowledge diffusion on domestic labor productivity: empirically derived from patents, R&D spillovers, and productivity effects among technology leaders; analysis extended to include China and Korea.

### Results and economic costs (verbatim outcomes)
- "Most countries, including global technology hubs, lose across scenarios."
- "China loses the most in all scenarios; Korea comes second in four scenarios."
- Example outcomes:
  - "China’s potential GDP could be reduced by 1.7 to 8.7 percent in the long term."
  - "Korea and Japan could be slightly positive in some scenarios (Scenario 1) or lose 1.9 and 5.4 percent respectively in a more disruptive scenario (Scenario 4)."
- Trade diversion may benefit some countries (for example, India) that can fill gaps for either Chinese or US goods.
- "Sectoral misallocation (second layer) significantly amplifies costs; reduced knowledge diffusion (third layer) has a significant but more modest additional impact."
- Policy implication: "Technological decoupling is not in the best interest of global or individual economies, especially amid a fragile COVID-19 recovery." Recommended approach: "tackle legitimate differences over high-tech trade and investment constructively to preserve an open, rules-based international trading system and reinforce international cooperation to expand the technological frontier."

### Annex Figure 1 — scenario insights (verbatim highlights)
- Figure title: "China/United States versus China/OECD Decoupling: Real GDP for Select Regions (Percent deviation from October 2020 World Economic Outlook)."
- Legend note: "Purple is China-United States without preferential attachment; orange is China-OECD with preferential attachment."
- Key findings:
  - "China usually loses the most in each scenario."
  - "Some countries can gain in scenarios without preferential attachment because they can act as partial substitutes for a hub. Example: India can help replace China for the United States or Germany in Scenarios 1, 3, and 5."
  - "Scenarios 3 and 4 lead to the largest losses for China, as they break up two pairs (China and Japan; China and Korea) that are present in the other four scenarios."
  - "Other regions outside of Asia lose the most under Scenario 6, as regions would no longer trade with two major hubs instead of just one."

---

### Targeted Liquidity, Credit Guarantees, and Exit Strategy Guidance

### Targeted liquidity and working capital measures (verbatim elements)
- "TLTRO with funds to be invested in targeted industries."
- Businesses in affected sectors can qualify for additional working capital loans "of up to 10% of the approved amount of their existing working capital loans, to be repaid within a year."
- Working capital loans at "the fixed interest rate of 4% per year, with a grace period of 6 months and a repayment period of 24 months."
- "Investment loans with a 5-year maturity are also possible under this scheme."

### Refinancing facilities and credit guarantees (country measures, verbatim)
- Bangladesh Bank introduced refinancing schemes totaling "1.4 pct of GDP."
  - "TK150 billion for industry and service sector loans; TK100 billion for CMSMEs."
  - "Additional refinance schemes for specific sectors of Tk 130 bn."
  - Guarantee scheme take-up "has been low (20 percent as of end-Oct.)"
- Reserve Bank of India: special refinance facilities; government credit guarantees for MSME "extended... until Nov. 30 or until the cap is reached (Rs 3 trillion, 1.5% of GDP)."
- Sri Lanka: Refinance facility "up to a total of Rs 150 billion (about 1% of GDP)."
  - "Refinancing is at an interest rate of 1% per year" and disbursement "about Rs 133 billion (0.9% of GDP) ... approved as of October."
- Sources: Bangladesh Bank; Central Bank of Sri Lanka; Maldives Monetary Authority; Nepal Rastra Bank; Reserve Bank of India; Royal Monetary Authority of Bhutan; and IMF staff estimates.

### Cross-cutting observations on liquidity support and prudential settings
- Funds channeled to solvent firms facing liquidity strains; several schemes subsidized interest rates with government bearing cost and providing partial or total government guarantees.
- Banks are receiving liquidity support and capital buffers are being drawn down appropriately to support private sector credit.
  - Monetary easing with cuts to policy rates and cash reserve ratios.
  - Central banks have made refinancing schemes available.
  - Macroprudential policy loosened in some countries: "no longer requiring accumulation of the countercyclical capital buffer (Nepal), drawing down the capital conservation buffer (Sri Lanka), and reducing the liquidity coverage ratio (India)."
  - Regulatory relief in India: "more time to implement the net stable funding ratio and the last phase of the capital conservation buffer."

### Key priorities and policy advice for exit and normalization (verbatim guidance)
- Targeting:
  - "Eligibility criteria for debt service moratoria should be targeted to firms that are solvent but need liquidity support; broad-based moratoria risk putting pressure on bank liquidity."
  - "Targeting can be done gradually after closely monitoring the impact of moratoria and other relief measures; data reporting requirements should be re-calibrated and strengthened."
- Prudential requirements:
  - "Do not relax loan classification and provisioning standards or use regulatory requirements to direct lending to specific sectors."
  - "Loan classification rules should not be frozen; apply normally as banks gather enough information on borrowers’ ability to repay, taking into account moratoria and relief measures."
  - "Timely resolution of NPLs is important."
- Preserving bank capital:
  - Supervisory authorities should "temporarily suspend distribution of dividends, share buybacks, and discretionary bonus payments until the economic outlook becomes more favorable."
- Exit strategy:
  - "Exceptional measures should have clear cut-off dates so they do not become permanent and undermine asset quality; authorities can review and extend if needed."
- Continued reform:
  - "Resume efforts to implement reforms to address existing vulnerabilities once the shock subsides."
  - "Ensure capital buffers are sufficient and strengthen mechanisms to deal with NPLs."

---

### Fiscal Impact of Carbon Pricing and Green Recovery

### Fiscal impact (verbatim)
- "A well-designed carbon pricing reform could raise '1.5 to 2 percent of GDP in additional fiscal revenues by 2030.'"
- If revenues "were put toward reducing the country’s deficit, it would play a large role in counteracting the deterioration in India’s fiscal position associated with COVID-19 and necessary fiscal support measures."

### Distributional, poverty, and implementation considerations (verbatim)
- "Analysis in the 2019 Fiscal Monitor suggests that a carbon tax in India may in fact have a similar or smaller incidence on lower-income households than on those with higher incomes," because "electricity is either less available or less consumed by rural households in India."
- Using part of carbon pricing revenues to increase fiscal transfers to lower-income households would:
  - "make the reform more progressive"
  - "could result in net benefits among poorer households"
  - "make the reform both pro-equity and pro-poor"
  - "help with improving air quality and mitigating pollution"
- "Further work is needed in each South Asian country to evaluate, assess, and design the practical aspects of the policy implementation to ensure vulnerable and low-income households are protected and adequately covered by the various fiscal transfers."
- "More thought will need to be given to the impact of carbon taxes on growth and inflation as policymakers are likely be worried about this."

### Sectoral reallocation and labor-market implications (verbatim)
- "The COVID-19 shock has already led to sectoral reallocation away from some dirty-energy-intensive sectors."
- Impacted sectors include "airlines, transportation, etc.," with adverse impacts "expected to last for several years."
- Medium-term opportunity: "job creation to occur in less pollution-prone sectors."
- Complementary measures: "a well-designed carbon tax package—that is combined with complementary product and labor market policies—could support the re-allocation of capital to and re-skilling of labor in more productive and cleaner sectors."

### Post-pandemic recovery and leadership opportunity (verbatim)
- "The post-pandemic recovery offers a unique opportunity the region: its countries can be global leaders in climate-change mitigation efforts."
- Example: "several advanced economies are envisioning a phasing out of less-clean energy sources (for example, Canada by 2030)," suggesting India "has an opportunity to embark on a similar goal and demonstrate global leadership."
- Local benefits: "reduce local air pollution and would incentivize a shift toward cleaner and potentially job-rich renewable technologies."

---

### Broader COVID-19 Context and Consolidated Policy Takeaways

### Pandemic effects and longer-running regional challenges (verbatim)
- "Fear of infection and social distancing weigh on consumer confidence, keeping economic activity below capacity."
- "Labor markets show increasing signs of scarring, with surging unemployment and plunging labor force participation, particularly for women and younger workers."
- "Prospects for a global trade-led recovery are uncertain, with weak global growth, closed borders, and festering tensions around trade, technology, and security."
- Longer-running regional challenges: "slowing productivity growth, high indebtedness, population aging, and rising inequality."

### Consolidated policy takeaways (verbatim)
- To flatten the virus curve:
  - "(1) activate containment measures early, when infection rates are still low;"
  - "(2) exit lockdowns after the virus has been suppressed for better health and economic outcomes;"
  - "(3) put in place comprehensive testing and tracing systems to minimize the risk of second waves."
- To prevent longer-term scarring:
  - "step up economic reforms to boost productivity growth and investment, allow for adequate reallocation of resources across sectors, and support workers affected by the transition."
  - Reform package could include "well-targeted hiring subsidies and worker-retraining schemes, infrastructure upgrades, and reforms to simplify business processes and reduce the regulatory and tax burden."
- To minimize side effects of unconventional policies:
  - "(1) target liquidity support toward firms that are solvent,"
  - "(2) ensure that bond purchases are guided by well-defined last resort criteria,"
  - "(3) establish clear frameworks for the use of unconventional policy and have an exit strategy."
- For countries with high public debt burdens:
  - "focus on revenue mobilization, public financial management, and debt management;"
  - "liquidity support from multilateral partners, the G20 Debt Service Suspension Initiative, and debt relief and/or debt reduction can provide some relief."
- To address high corporate debt burden:
  - "reinforce private debt resolution frameworks, ensure the availability of adequate financing, and facilitate access to risk capital to speed up the reallocation of resources into growth sectors."
- To create more resilient and inclusive economies:
  - "(1) support the vulnerable through targeted policies, including conditional cash transfer schemes;"
  - "(2) get workers into formal systems that can be activated and scaled up;"
  - "(3) in rebuilding the economy, channel support toward cleaner sectors, to reduce emissions and fight climate change."

*Source: IMF staff chapter “Introduction” from pataceea - Introduction*

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### Adjusting to the COVID-19 shock
- Asia-Pacific was the first region hit by COVID-19, straining people and economies and complicating policymaking.
- Focus areas: (1) adjusting to the COVID-19 shock, (2) using unconventional policies when policy space is limited, (3) dealing with debt, and (4) helping the vulnerable and greening the recovery.
- Key lessons from Chapter 1 on containment and reopening:
  - Activate containment measures early, when infection rates are still low, to flatten the virus curve and reduce the depth and duration of the economic downturn.
  - Exiting lockdowns after the virus has been suppressed leads to better health and economic outcomes; a sequenced approach prioritizing essential sectors and reopening regions based on forward-looking risk assessments can reduce economic costs while minimizing health risks (China’s experience cited).
  - A comprehensive testing and tracing system can minimize the risk of second waves.
- Medium-term scarring and reallocation (Chapter 2):
  - The pandemic triggers a severe global recession with likely long-lasting effects.
  - Examples of Australia and New Zealand show a large and persistent decline in potential output across several scenarios.
  - Policy priorities: step up economic reforms to boost productivity growth and investment, allow adequate reallocation of resources across sectors, and support workers affected by transition.
- Tourism impact (Chapter 3):
  - Tourism accounts for more than 10 percent of the global economy and is a major employer of youth and women.
  - Tourism-dependent countries face larger scarring from services requiring in-person contact; policies and reforms needed to mitigate output and job losses and to facilitate sector transition to the “new normal.”
- Technological decoupling risks (Chapter 4):
  - COVID-19 could accelerate China–US trade and technology tensions and permanently reshape global value chains and international investment flows.
  - Alternative decoupling scenarios studied: China–US decoupling, China–OECD decoupling, and a multipolar world of three technology hubs decoupled from one another — all show significant losses for most countries.
  - Findings underscore the role of trade cooperation as a global public good.

### Unconventional policies when policy space is limited
- Fiscal and monetary policy support in Asia was significant, but many emerging market and developing economies are running out of policy space.
- Financial sector measures in South Asia (Chapter 5):
  - Measures included debt service moratoria, targeted lending schemes, and liquidity support.
  - Short-term relief was appropriate, but policymakers should modify measures to minimize distortions and define clear exit strategies to avoid aggravating vulnerabilities.
- Unconventional monetary policies (UMPs) in Emerging Asia (Chapter 6):
  - ASEAN-4 experience (Indonesia, Malaysia, Philippines, Thailand): Malaysia and Thailand used central bank lending operations to provide extra liquidity to firms; Indonesia and the Philippines used large-scale asset purchases.
  - The turn to UMPs in emerging economies was unexpected and entails risks that grow with prolonged use; steps needed include establishing frameworks delineating UMP use.
- Japan’s Yield Curve Control (YCC) lessons (Chapter 7):
  - The Bank of Japan pegged the 10-year Japanese government bond (JGB) yield at about zero percent in September 2016.
  - Trade-offs: choice of YCC target horizon balances stimulating the economy versus exposing the central bank’s balance sheet to risk, and between maintaining price inflation and financial stability.
  - Exiting YCC smoothly is challenging; poor communication of normalization could trigger a government bond market sell-off. Without an automatic exit strategy, YCC can expose the central bank to the risk of fiscal dominance.

### Dealing with debt
- Post-pandemic debt burdens will be a major issue for some countries.
- Pacific island countries (Chapter 8):
  - Balancing pandemic recovery, rebuilding fiscal buffers, and investing in climate resilience may prove too much for some Pacific island economies.
  - Given weak growth history and likelihood of further exogenous shocks, debt relief or debt reduction may be required to free resources for health, education, social protection, and improved public debt management.
- Corporate sector indebtedness and insolvency risks (Chapters 9–10):
  - Many ASEAN firms entered the pandemic with a record-high debt service burden, driven by sustained decline in profitability since the global financial crisis and, more recently, higher financing costs.
  - The expected COVID-19 shock could cause an unprecedented wave of corporate bankruptcies absent policy interventions, with close to half of sample firms unable to generate enough earnings to cover their interest payments falling due in 2020.
  - Policy recommendations:
    - Re-orient support to viable firms with liquidity shortages.
    - Prepare for an orderly phasing-out of exceptional support measures.
    - Strengthen insolvency systems and frameworks to “flatten the insolvency curve.”
    - Ensure availability of adequate financing and facilitate access to risk capital to speed up reallocation of resources into growth sectors.
    - Revitalize firm dynamism and reinforce social protection.

### Helping the vulnerable and building a sustainable future
- Labor market impacts and inequality (Chapter 11):
  - Unemployment surged and labor force participation plunged; job losses concentrated in lower-wage industries and among women and youth.
  - The pandemic may increase inequality in the medium term, especially if it accelerates displacement of low-skilled workers through automation and robotization.
  - Higher inequality could lead to a significant increase in social unrest.
  - Model-based analysis suggests targeted policies can mitigate adverse distributional consequences while supporting economic activity and virus containment.
- Unemployment support and social protection (Chapter 12):
  - The pandemic exposed gaps in social protection and exacerbated inequality across advanced and emerging Asia.
  - The chapter reviews government responses and explores whether more should be done to support the unemployed.
  - It outlines what expanded support would look like given structural features of regional labor markets and discusses challenges in expanding social safety nets: capacity, coverage, incentives, and fiscal sustainability.
- Green recovery opportunities (Chapter 13):
  - The pandemic’s temporary reallocation away from energy-intensive sectors offers an opportunity to create jobs in more productive and cleaner sectors.
  - A well-designed carbon tax package and complementary product and labor market policies could support capital reallocation and labor reskilling.
  - South Asia may be uniquely placed to accelerate mitigation efforts through inclusive carbon taxes; such efforts could limit climate change, improve local health, boost fiscal revenues, and support the region’s role as one of the world’s largest carbon-dioxide emitters.

*Chang Yong Rhee and Katsiaryna Svirydzenka — Introduction to Policy Advice to Asia in the COVID-19 Era*

### Introduction

### pataceea - Introduction

### Constructing Containment Indices
- Sample covers Australia, China, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Thailand, and Vietnam for the period January 1–September 9, 2020.
- Developed a de jure narrative stringency index capturing government-imposed restrictions related to six sectors: schools, retail, services, industry, gatherings and public events, and international travel.
- Sources used to identify policy actions include a survey of IMF economists and publicly available sources such as the ACAPS Government Measures Dataset, government press releases, and news sources.
- The index provides two key advantages relative to other public indices:
  - More granular view by distinguishing between key economic sectors (services, industry, retail).
  - Greater granularity for China by constructing the index at the province level, improving capture of easing of measures.

### Containment Strategies in Asia — timing, stringency, and outcomes
- Timing and sequencing:
  - On average, Asian countries tightened domestic restrictions five days after a significant outbreak (defined as 100 cumulative cases).
  - Indonesia waited 25 days to tighten restrictions.
  - International travel restrictions were generally imposed first, followed by school closures.
- Stringency and duration:
  - Several countries imposed near-complete lockdowns for more than a month (Malaysia, New Zealand, Philippines).
  - Other countries closed only nonessential services while allowing industrial sectors to continue operating (Australia, Thailand, Vietnam).
  - Korea did not implement mandatory shutdowns; instead issued strong recommendations, relied on voluntary social distancing, and used comprehensive testing and tracing.
- Effectiveness variations:
  - Restrictions are generally more effective when implemented early (when infection rates are still low).
  - Implementation and enforcement challenges—especially in densely populated emerging markets with higher informality and poverty—may have reduced effectiveness (India, Indonesia, Philippines).
  - Limited health care capacity, including testing and tracing, affected effectiveness; some countries ramped up testing and tracing, while others lagged (Indonesia, Philippines).
- Reopening patterns:
  - Asian countries generally reopened after suppressing the virus.
  - Most eased restrictions when new cases were more than 80 percent below peak levels.
  - Australia, Japan, and Malaysia experienced substantial second waves; China, Korea, New Zealand, and Vietnam had smaller outbreaks largely contained.
  - Some countries reopened before infection rates fell significantly and experienced increases in cases (India eased while cases were still rising; Indonesia and the Philippines reopened without virus suppression).
  - Early re-openers continued to experience high numbers of new infections, reflecting increased mobility after reopening, reduced voluntary social distancing, and factors such as mass movement of migrant workers in India.
- Pace of reopening:
  - The speed of reopening has been slower in early openers (Indonesia, India, Philippines), with many sectors remaining partially closed.
  - Countries that waited until cases subsided have continued easing and many sectors are now completely open or operating with enhanced health protocols.
  - Some adopted a sequential approach reopening lower-risk regions or sectors first and used localized lockdowns to control clusters (China, Vietnam).

### Economic and health-policy linkages after reopening
- Economic recovery:
  - Average purchasing managers’ indexes (PMIs) in the second half of 2020 remain significantly below pre-COVID-19 levels in India, Indonesia, and the Philippines.
  - PMIs recovered or surpassed pre-COVID-19 levels in most countries that reopened after suppressing the virus.
- Health measures:
  - Testing and contact tracing have been important in mitigating spread after exiting lockdowns.
  - Increases in mobility after lifting lockdowns led to new clusters in some countries that had suppressed the virus, causing second waves (Australia, Japan, Malaysia).
  - Re-imposition of strict containment in affected regions helped contain second waves (Australia).
  - Effective testing, tracing, and quarantining systems helped detect and contain clusters before widespread community transmission (China, Korea, New Zealand, Vietnam).
  - Vietnam quarantined all close contacts of positive cases.
  - China and Korea used technology and big data to improve contact tracing efficiency and perform granular risk assessment.
  - Localized lockdowns were used in hot spots to prevent further spread.

### Lessons from Asia’s Experience
- Key lessons highlighted:
  - Containment measures should be activated early, when infection rates are still low, to effectively flatten the virus curve and reduce the depth and duration of the economic downturn.
  - Exiting lockdowns after the virus has been suppressed leads to better health and economic outcomes; a sequenced approach prioritizing essential sectors and reopening regions based on forward-looking risk assessments can reduce economic costs while minimizing health risks.
  - A comprehensive testing and tracing system can minimize the risk of second waves. Adequate testing enables early detection of clusters; tracing and isolation (including quarantining close contacts and localized lockdowns) reduce community transmission. Details of systems will vary across countries depending on societal preferences and legal protections relating to privacy.

### Addressing the Pandemic’s Medium-Term Fallout in Australia and New Zealand — projections and channels of scarring
- Near-term impact:
  - Second quarter of 2020 GDP decline: 7.0 percent in Australia and 9.5 percent (expenditure side) in New Zealand.
- Historical context:
  - On average, five years after the start of a recession, output is about 4¾ percent below its precrisis trend in advanced economies.
  - Severe recessions (often with financial crises) show output about 11 percent below pre-recession trend five years on.
- Channels causing medium-term scarring:
  - Labor supply and sectoral reallocation:
    - Economic reorientation away from severely affected sectors and frozen migration will limit labor supply.
    - Services requiring face-to-face contact, like tourism and recreational activities, may not fully recover in the near term.
    - Sectoral reallocation during the pandemic has been larger than at any time in the past two decades.
    - Estimates indicate an increase in structural unemployment of about 0.6–0.8 percentage point in the medium term.
    - Immigration, responsible for about 60 to 70 percent of recent population increases in both countries, has fallen due to border closures and is likely to take several years to fully recover.
  - Capital accumulation:
    - Low growth, heightened uncertainty, and rising corporate debt will lead firms to delay investment.
    - Increase in corporate debt can reduce appetite for financing investments.
    - Projections point to a decline in the capital stock by about 5–6 percent relative to the pre-COVID trend.
  - Productivity:
    - Productivity growth is likely to decline as lower investment, especially in research and development, reduces innovation.
    - Rising market concentration from bankruptcies and weak startup activity can harm competition and reduce incentives to innovate.
    - On net, projections point to a further decline in medium-term productivity by about 1.5 percent compared to the pre-COVID trend.
- Projected impact on potential output:
  - Projections indicate that the level of potential output may remain significantly below precrisis projections in Australia and New Zealand due to reduced labor supply, capital stock, and productivity.
  - Scenario ranges for potential output by 2025 relative to precrisis projections:
    - Australia: within a range of 2¾ to 7¼ percent below precrisis projections.
    - New Zealand: within a range of 3¾ to 8½ percent below precrisis projections.
- Policy implication:
  - Stepping up economic reforms will be paramount to mitigate COVID-19’s fallout on medium-term output.

*Source: IMF staff chapter “Introduction” from pataceea - Introduction*

### 1. Australia2. New Zealand

### 1. Australia2. New Zealand

### Addressing the Pandemic’s Medium-Term Fallout in Australia and New Zealand
- Crisis-management response included large-scale fiscal stimulus featuring wage subsidies, and ultra-loose monetary policy.
- Policy guidance:
  - Maintain vigorous fiscal and monetary stimulus until the recovery is well-entrenched to support demand and limit medium-term scarring.
  - As recovery proceeds, shift focus to reforms that boost productivity growth and investment, allow adequate reallocation of resources across sectors, and support workers affected by the transition.
  - Gradually replace wage subsidies with well-targeted hiring subsidies and adequate unemployment benefits to allow more efficient reallocation of jobs across sectors while protecting displaced workers.
  - Emphasize retraining displaced workers to reduce skill mismatches.
  - Prioritize infrastructure upgrades, including green investments and the digital economy, to boost productive capacity.
  - Reform to simplify business processes and reduce regulatory and tax burdens to boost innovation, productivity, and investment.
- Rationale:
  - These reforms take significant time to boost output; starting now supports medium-term growth and living standards and helps replenish policy buffers for future shocks.

### The Future of Tourism in the Post-Pandemic World: Economic Challenges and Opportunities for Asia-Pacific and the Western Hemisphere
- Context and significance:
  - Tourism is a major economic driver, accounting for more than 10 percent of the global economy.
  - On average, tourism directly accounts for about 3½ percent of global GDP; the total contribution (direct, indirect, and induced) is estimated to extend to more than 10 percent of global GDP.
  - Tourism is a major employer of youth and women and is highly interconnected across sectors; millions of tourism jobs are at risk.
  - Informal and migrant workers, particularly women and youths, have been disproportionately affected.
- Impact assessment:
  - The pandemic has led to a sudden stop in travel and collapse in tourism activity; the decline in tourist flows is expected to weigh heavily on current account balances of tourism exporters.
  - Empirical analysis using an augmented gravity model and past epidemics finds impacts of epidemics on tourism flows are much greater in developing countries than in advanced economies.
  - Forward-looking model simulations show scope for faster recovery if rapid vaccine distribution returns travel to pre-pandemic levels, but also significant downside risks from protracted uncertainty and limited vaccine effectiveness and availability, with deep and long-term scarring effects amplifying existing vulnerabilities.
  - Strong correlation found between COVID-19 spread and big-data high-frequency travel indicators, implying healthcare system quality will be pivotal in tourism recovery.
  - Transition challenges: leaping from high-density to socially distanced tourism faces structural rigidities and stakeholder consensus issues that could amplify pre-pandemic vulnerabilities.
- Policy options (phased):
  - Phase 1, crisis mitigation:
    - Many countries provided fiscal support to buttress demand and preserve jobs; further support may be needed.
    - Well-designed fiscal stimulus can support the most affected sectors including the poorest households and businesses, while being mindful of fiscal space and debt sustainability.
  - Phase 2, reopening:
    - Devote special attention to health and hygiene protocols as economies and borders reopen.
    - Domestic tourism is being incentivized through attractive offers; tourism sector integrated into reopening strategies.
    - Creation of COVID-free travel bubbles shows potential despite implementation challenges.
    - Targeted policies to address pandemic impacts on youth and women, and enhance access to new opportunities including digitalization, can mitigate scarring and broaden inclusion.
    - Monitor and promote timely restructuring and retooling to prevent firms, especially SMEs, from slipping from liquidity stress into insolvency.
  - Phase 3, recovery:
    - Shift toward eco-sustainable tourism services with lower density, higher value-added, and greater digitalization to reduce health risks, foster a greener recovery, and diversify economies.
    - Use the juncture to accelerate long-term structural transformation within and beyond tourism.
    - Global cooperation is required, starting with establishing global safety and health protocols and making a reliable vaccine widely available.

### Technological Decoupling in the Post-COVID-19 Era? Implications for Asia and Beyond
- Context:
  - China and the United States are key technology hubs for global value chains (GVCs) and sources of global technological progress; barriers to trade and investment in high-tech goods and services between major economies could profoundly impact GVCs and global production.
  - High-tech production is heavily dependent on cross-border trade; the share of foreign value-added in gross exports in the electronics sector is significantly higher than for all sectors in aggregate, especially in Asia.
  - Restrictions on international diffusion of technology (FDI, patents, software) reduce productivity of national R&D by limiting positive knowledge spillovers.
- Decoupling scenarios:
  - Technological decoupling defined as nearly eliminating trade between decoupling countries in high-tech sectors (OECD (2011) classification of technological intensity).
  - Three broad hub configurations analyzed:
    - China | United States
    - China | OECD
    - China | United States | Germany
  - For each configuration, two variants on non-hub country behavior: No preferential attachment (non-hub countries trade freely with all hubs) and Yes preferential attachment (non-hub countries align with the hub for which their total trade is highest and only trade within that alignment).
  - Non-tariff barriers are raised to nearly eliminate trade in high-tech sectors in all scenarios.
- Channels of impact analyzed in three layers:
  - Short- and long-term trade channel: higher non-tariff barriers depress demand for high-tech imports, compounded by investment and consumption responses to permanent income losses.
  - Long-term output impact due to sectoral misallocation: quantified using a sectoral computable general equilibrium trade model.
  - Dynamic losses from lower cross-border knowledge diffusion on domestic labor productivity: derived empirically from patents, R&D spillovers, and productivity effects among technology leaders; analysis extended to include China and Korea.
  - Knowledge diffusion is two-way; China has become an important contributor to the global knowledge frontier—for example, China’s contribution to US labor productivity accounts for about one-fourth of total knowledge spillovers the United States receives from abroad.
- Results and economic costs:
  - Most countries, including global technology hubs, lose across scenarios.
  - China loses the most in all scenarios; Korea comes second in four scenarios.
  - Example outcomes:
    - China’s potential GDP could be reduced by 1.7 to 8.7 percent in the long term.
    - Korea and Japan could be slightly positive in some scenarios (Scenario 1) or lose 1.9 and 5.4 percent respectively in a more disruptive scenario (Scenario 4).
  - Trade diversion may benefit some countries (for example, India) that can fill gaps for either Chinese or US goods.
  - Sectoral misallocation (second layer) significantly amplifies costs; reduced knowledge diffusion (third layer) has a significant but more modest additional impact.
- Policy implication:
  - Technological decoupling is not in the best interest of global or individual economies, especially amid a fragile COVID-19 recovery.
  - Rather than tit-for-tat decoupling, legitimate differences over high-tech trade and investment should be tackled constructively to preserve an open, rules-based international trading system and reinforce international cooperation to expand the technological frontier.

*Italic: Source — IMF staff content from the provided PDF excerpt.*

### Annex Figure 1 presents results for the six technological decoupling scenarios

### Annex Figure 1 presents results for the six technological decoupling scenarios

### Annex Figure context and measurement
- Annex Figure 1 presents results for the six technological decoupling scenarios outlined in Table 1.
- Figure title (from source): China/United States versus China/OECD Decoupling: Real GDP for Select Regions (Percent deviation from October 2020 World Economic Outlook).
- Note on legend: Purple is China-United States without preferential attachment; orange is China-OECD with preferential attachment.

### Key findings from the scenarios
- China usually loses the most in each scenario.
- Some countries can gain in scenarios without preferential attachment because they can act as partial substitutes for a hub. Example: India can help replace China for the United States or Germany in Scenarios 1, 3, and 5.
- Scenarios 3 and 4 lead to the largest losses for China, as they break up two pairs (China and Japan; China and Korea) that are present in the other four scenarios, and are most beneficial to China, Japan, and Korea.
- Other regions outside of Asia lose the most under Scenario 6, as regions would no longer trade with two major hubs instead of just one.

### Scenario definitions (as listed in the source)
- Scenario 1: China-US w/o preferential attachment
- Scenario 2: China-US with preferential attachment
- Scenario 3: China-OECD w/o preferential attachment
- Scenario 4: China-OECD with preferential attachment
- Scenario 5: China-US-Germany w/o preferential attachment
- Scenario 6: China-US-Germany with preferential attachment

### Implications illustrated by the figure
- The figure reports percent deviations in Real GDP relative to the October 2020 World Economic Outlook baseline.
- The scenarios illustrate the role of preferential attachment in determining winners and losers: absence of preferential attachment allows partial substitution by other countries (e.g., India), while presence of preferential attachment concentrates effects around hub pairs or groups.
- Breaking up established pairs (China-Japan; China-Korea) amplifies China’s losses and benefits relevant partner countries (Japan and Korea).
- Greater fragmentation that severs trade ties with multiple major hubs (Scenario 6) disproportionately harms regions outside Asia.

*Source: IMF staff calculations.*

### 2.0 and an on-tap

### 2.0 and an on-tap

### Targeted liquidity and working capital measures
- TLTRO with funds to be invested in targeted industries.
- Ensure the availability of working capital to businesses.
- Businesses in affected sectors, if they can show the need, can qualify for additional working capital loans of up to 10% of the approved amount of their existing working capital loans, to be repaid within a year.
- Introduced working capital loans at the fixed interest rate of 4% per year, with a grace period of 6 months and a repayment period of 24 months.
- Investment loans with a 5-year maturity are also possible under this scheme.

### Refinancing facilities and credit guarantees (country measures)
- Bangladesh Bank (BB) introduced refinancing schemes for banks that extend working capital loans totaling 1.4 pct of GDP.
  - TK150 billion for industry and service sector loans; TK100 billion for CMSMEs.
  - Additional refinance schemes for specific sectors of Tk 130 bn.
  - BB also introduced a guarantee scheme for working capital loans extended to CMSMEs as take-up has been low (20 percent as of end-Oct.)
- Reserve Bank of India introduced special refinance facilities for rural banks, housing finance companies, and small and medium-sized enterprises.
  - The government introduced credit guarantees for micro, small and medium enterprises (MSME) and extended them until Nov. 30 or until the cap is reached (Rs 3 trillion, 1.5% of GDP).
- Increased the Refinance Fund to provide subsidized funding for banks willing to lend at concessional rates to priority sectors affected by the pandemic.
- Sri Lanka: Refinance facility for banks, up to a total of Rs 150 billion (about 1% of GDP).
  - Refinancing is at an interest rate of 1% per year, and the Central Bank of Sri Lanka also provides a partial guarantee.
  - Disbursement of about Rs 133 billion (0.9% of GDP) under this scheme approved as of October.
- Sources cited: Bangladesh Bank; Central Bank of Sri Lanka; Maldives Monetary Authority; Nepal Rastra Bank; Reserve Bank of India; Royal Monetary Authority of Bhutan; and IMF staff estimates.

### Cross-cutting observations on liquidity support and prudential settings
- Funds are being channeled to solvent firms facing liquidity strains; several schemes have subsidized interest rates, with the government bearing the cost and providing partial or total government guarantees in most cases.
- Banks are receiving liquidity support and capital buffers are being drawn down appropriately to support private sector credit.
  - Monetary easing with cuts to policy rates and cash reserve ratios.
  - Central banks have made refinancing schemes available to support liquidity.
  - Macroprudential policy loosened in some countries: no longer requiring accumulation of the countercyclical capital buffer (Nepal), drawing down the capital conservation buffer (Sri Lanka), and reducing the liquidity coverage ratio (India).
  - Regulatory relief in India: more time to implement the net stable funding ratio and the last phase of the capital conservation buffer.

### Key priorities and policy advice for exit and normalization
- Targeting:
  - Eligibility criteria for debt service moratoria should be targeted to firms that are solvent but need liquidity support; broad-based moratoria risk putting pressure on bank liquidity.
  - Targeting can be done gradually after closely monitoring the impact of moratoria and other relief measures; data reporting requirements should be re-calibrated and strengthened.
- Prudential requirements:
  - Do not relax loan classification and provisioning standards or use regulatory requirements to direct lending to specific sectors.
  - Loan classification rules should not be frozen; apply normally as banks gather enough information on borrowers’ ability to repay, taking into account moratoria and relief measures.
  - Timely resolution of NPLs is important.
- Preserving bank capital:
  - Supervisory authorities should temporarily suspend distribution of dividends, share buybacks, and discretionary bonus payments until the economic outlook becomes more favorable. (India and Sri Lanka have already taken some of these steps.)
- Exit strategy:
  - Exceptional measures should have clear cut-off dates so they do not become permanent and undermine asset quality; authorities can review and extend if needed.
- Continued reform:
  - Resume efforts to implement reforms to address existing vulnerabilities once the shock subsides.
  - Ensure capital buffers are sufficient and strengthen mechanisms to deal with NPLs.

*Italic: Sources compiled from the provided IMF content.*

### 1.5 to 2 percent of GDP in additional fiscal revenues by 2030. If this boost

### pataceea - 1.5 to 2 percent of GDP in additional fiscal revenues by 2030. If this boost

### Fiscal impact of carbon pricing
- A well-designed carbon pricing reform could raise "1.5 to 2 percent of GDP in additional fiscal revenues by 2030."
- If these additional revenues "were put toward reducing the country’s deficit, it would play a large role in counteracting the deterioration in India’s fiscal position associated with COVID-19 and necessary fiscal support measures."

### Distributional and poverty considerations
- "Analysis in the 2019 Fiscal Monitor suggests that a carbon tax in India may in fact have a similar or smaller incidence on lower-income households than on those with higher incomes," largely because "electricity is either less available or less consumed by rural households in India."
- Using part of carbon pricing revenues to increase fiscal transfers to lower-income households would:
  - "make the reform more progressive"
  - "could result in net benefits among poorer households"
  - "make the reform both pro-equity and pro-poor"
  - "help with improving air quality and mitigating pollution"
- Further action needed:
  - "Further work is needed in each South Asian country to evaluate, assess, and design the practical aspects of the policy implementation to ensure vulnerable and low-income households are protected and adequately covered by the various fiscal transfers."
  - "More thought will need to be given to the impact of carbon taxes on growth and inflation as policymakers are likely be worried about this."

### Sectoral reallocation and labor-market implications
- "The COVID-19 shock has already led to sectoral reallocation away from some dirty-energy-intensive sectors," which "could help reduce transition costs on the path to a greener economy."
- Sectors particularly impacted include "airlines, transportation, etc.," with adverse impacts "expected to last for several years."
- Medium-term opportunity: "job creation to occur in less pollution-prone sectors."
- Complementary measures: "a well-designed carbon tax package—that is combined with complementary product and labor market policies—could support the re-allocation of capital to and re-skilling of labor in more productive and cleaner sectors."

### Post-pandemic recovery and leadership opportunity
- "The post-pandemic recovery offers a unique opportunity the region: its countries can be global leaders in climate-change mitigation efforts."
- Example: "several advanced economies are envisioning a phasing out of less-clean energy sources (for example, Canada by 2030)," suggesting India "has an opportunity to embark on a similar goal and demonstrate global leadership."
- Local benefits: "reduce local air pollution and would incentivize a shift toward cleaner and potentially job-rich renewable technologies."

### Broader COVID-19 context and key policy takeaways for Asia
- Pandemic effects highlighted:
  - "Fear of infection and social distancing weigh on consumer confidence, keeping economic activity below capacity."
  - "Labor markets show increasing signs of scarring, with surging unemployment and plunging labor force participation, particularly for women and younger workers."
  - "Prospects for a global trade-led recovery are uncertain, with weak global growth, closed borders, and festering tensions around trade, technology, and security."
- Longer-running regional challenges: "slowing productivity growth, high indebtedness, population aging, and rising inequality."
- Key policy takeaways:
  - To flatten the virus curve:
    - "(1) activate containment measures early, when infection rates are still low;"
    - "(2) exit lockdowns after the virus has been suppressed for better health and economic outcomes;"
    - "(3) put in place comprehensive testing and tracing systems to minimize the risk of second waves."
  - To prevent longer-term scarring:
    - "step up economic reforms to boost productivity growth and investment, allow for adequate reallocation of resources across sectors, and support workers affected by the transition."
    - Reform package could include "well-targeted hiring subsidies and worker-retraining schemes, infrastructure upgrades, and reforms to simplify business processes and reduce the regulatory and tax burden."
  - To minimize the side effects of unconventional policies:
    - "(1) target liquidity support toward firms that are solvent,"
    - "(2) ensure that bond purchases are guided by well-defined last resort criteria,"
    - "(3) establish clear frameworks for the use of unconventional policy and have an exit strategy."
  - For countries with high public debt burdens:
    - "focus on revenue mobilization, public financial management, and debt management;"
    - "liquidity support from multilateral partners, the G20 Debt Service Suspension Initiative, and debt relief and/or debt reduction can provide some relief."
  - To address high corporate debt burden:
    - "reinforce private debt resolution frameworks, ensure the availability of adequate financing, and facilitate access to risk capital to speed up the reallocation of resources into growth sectors."
  - To create more resilient and inclusive economies:
    - "(1) support the vulnerable through targeted policies, including conditional cash transfer schemes;"
    - "(2) get workers into formal systems that can be activated and scaled up;"
    - "(3) in rebuilding the economy, channel support toward cleaner sectors, to reduce emissions and fight climate change."

### Key statistics and time references (verbatim)
- "1.5 to 2 percent of GDP in additional fiscal revenues by 2030."
- Reference to "2019 Fiscal Monitor."
- Example target year: "Canada by 2030."

*Source: pataceea - 1.5 to 2 percent of GDP in additional fiscal revenues by 2030. If this boost*

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_Source: https://www.imf.org/-/media/files/publications/dp/2021/english/pataceea.pdf_