## The Crisis is Not Over, Keep Spending (Wisely)

_IMF Blog, November 2, 2020_

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**Canonical URL:** [The Crisis is Not Over, Keep Spending (Wisely)](https://www.imf.org/en/blogs/articles/2020/11/02/the-crisis-is-not-over-keep-spending-wisely)

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## Bibliographic details
- Authors: Oya Celasun, Margaux MacDonald, Lone Engbo Christiansen
- Published: November 2, 2020

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### Key findings
- The pandemic-induced economic crisis is set to leave deep scars: human capital erosion from prolonged high unemployment and school closures, value destruction from bankruptcies, and constraints on future fiscal policy from elevated public debt.
- Groups that were already poor and vulnerable are set to see the largest setbacks.
- The G20 has provided around US$11 trillion in necessary support to individuals, businesses, and the healthcare sector since the start of the pandemic.
- Much fiscal support is gradually winding down; many benefits such as cash transfers to households, deferred tax payments, or temporary loans to businesses have expired or are set to expire by the end of this year.
- Fiscal deficits in almost all G20 economies are projected to shrink next year, based on announced budgets and current policies.
- In economies where deficits widened sharply this year, fiscal balances are now expected to narrow by more than 5 percent of GDP in 2021.
- While part of the fiscal improvement reflects projected stronger growth, the largest contributor is a sharp withdrawal of “discretionary” support—relief measures introduced to counter the effects of the crisis.
- Employment losses remain sizable, evidenced by massive shortfalls in projected employment relative to pre-pandemic trends.

### Risks and economic scars
- Human capital erosion from prolonged unemployment and school closures.
- Value destruction from bankruptcies leading to reduced productive capacity.
- Elevated public debt constraining future fiscal policy space.
- Disproportionate setbacks for already poor and vulnerable groups.
- Premature withdrawal of support risks further harm to livelihoods, heightened bankruptcies, and deeper long-term scars that could jeopardize the recovery.

### Policy recommendations (near-term)
- Maintain support throughout the crisis; resist tightening fiscal policy too early where possible.
- Ensure continued support for healthcare, individuals, and firms during the recovery phase.
- Where spending capacity is constrained, reprioritize spending to protect the most vulnerable.
- Avoid premature withdrawal of discretionary relief measures that were instrumental in stabilizing economies.

### Policy recommendations (transition to recovery and medium-term)
- Gear policies toward the post-pandemic reality and build resilience.
- Promote investment and hiring in expanding sectors to strengthen and sustain the recovery.
- Provide reskilling and training opportunities for the unemployed to address labor market shifts.
- Invest to promote decarbonization, which can lift employment in the near term and increase resilience over the longer term.

### Outlook and concluding message
- The road to strong, sustainable, balanced, and inclusive growth will be long and difficult.
- Now is the time to spend wisely and work together to build a better future.

*Oya Celasun, Margaux MacDonald, Lone Engbo Christiansen — November 2, 2020*

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## References

- [G20 Report on Strong, Sustainable, Balanced, and Inclusive Growth](https://www.imf.org/external/np/g20/110220.htm)

_Source: https://www.imf.org/en/blogs/articles/2020/11/02/the-crisis-is-not-over-keep-spending-wisely_