COVID-19 not only represents a worldwidepublic health emergency but has become an internationaleconomic crisis that could surpass the global financialcrisis of 2008–09. Right now, containment and mitigationmeasures are necessary to limit the spread of the virus andsave lives. However, they come at a cost, as shutdowns implyreducing economic activity. These human and economic costsare likely to be larger for developing countries, whichgenerally have lower health care capacity, larger informalsectors, shallower financial markets, less fiscal space, andpoorer governance. Policy makers will need to weighcarefully the effectiveness and socioeconomic consequencesof containment and mitigation policies, responding toepidemiological evidence on how the virus spreads and tryingto avoid unintended consequences. Economic policy in theshort term should be focused on providing emergency reliefto vulnerable populations and affected businesses. Theshort-term goal is not to stimulate the economy—which isimpossible, given the supply-restricting containmentmeasures, but rather to avoid mass layoffs and bankruptcies.In the medium term, macroeconomic policy should turn torecovery measures, which typically involve monetary andfiscal stimulus. However, in many developing countries,stimulus may be less effective because monetary transmissionis weak and fiscal space and fiscal multipliers are oftensmall. A more viable goal for macroeconomic policy indeveloping countries is avoiding procyclicality, ensuringthe continuity of public services for the economy, andsupporting the vulnerable. Because COVID-19 is truly aglobal shock, international coordination is essential, ineconomic policy,health care and science, and containment andmitigation efforts. Critical times call for well-designedgovernment action and effective public servicedelivery—preserving, rather than ignoring, the practices formacroeconomic stability and proper governance that serve ingood and bad times.
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