The cost of doing nothing: The price of inaction in response to the COVID-19 crisis

Type Report Author Dirk-Jan Omtzigt Author Ashley Pople URL https://www.unocha.org/sites/unocha/files/Cost%20of%20inaction%2010.07.20.pdf Pages 1-18 Date 10/07/2020 Institution UNOCHA Report Type Publications Language en Abstract The global crisis induced by the COVID-19 pandemic is unprecedented in nature. Emergingas a health crisis, the pandemic has become a threat to global prosperity and stability. Keeping in mind the fundamental uncertainty about the trajectory of the pandemic and the economic forecasts, there is common consensus that the global economy will experience the deepest recession since the Great Depression and the broadest collapse in per capita income since 1870. As of 24 June, the IMF projects a-4.9 percent contraction in global GDP in 2020, followed by a protracted and uneven recoverydue to the persistence of the shock. The extent to which these downturns are synchronised and spill over across borders makes this crisis relatively unique. Domestically, the OECD and the G20 countries have responded with a large stimulus package estimated at over $11 trillion (approximately 10% of world GDP). In comparison, the cost of protecting the most vulnerable 10 percent of the world from the worst primaryand secondary impacts of COVID-19 today is an additional $90 billion –less than 1 percent of the current stimulus package. Relative to high-income countries, “whatever it takes” is a fundamentally different concept in low-income countries due to limited forex reserves, central bank dollar swap lines and fiscal space. Strong multilateral coordination is required to meet the shortfall in financing and support the strengthening of health, education and other social safety nets –now, rather than later. It is better,cheaperand more dignifiedto frontloadresponses to the pandemic and itssecondary impacts. Waiting and then reacting when the full impacts are already visible would be a more expensive proposition. Delaying action not only shifts the burden to the future, but the price of the response will also exponentially increase, as the crisis cascades and reverberates for years to come. Acting now to mitigate the impact saves money in the long term.