By early April, nearly 150 countries had closed all schools and mandated cancellation of events, and more than 80 had closed all workplaces in order to control the spread of the virus. Travel restrictions were widespread., and have been accompanied by gyrations in financial markets and sharp declines in oil and industrial metals prices.
Share of global GDP represented by countries with mandatory closures and cancellations
In the short term, EMDEs likely to be hardest hit economically are those that have weak health systems; rely heavily on trade, tourism, or remittances from abroad; depend on commodity exports; or have financial vulnerabilities. On average, EMDEs have higher debt than prior to the global financial crisis, making them more susceptible to financial stress.
Government and corporate debt
The long-term damage of COVID-19 will be particularly severe in economies that suffer financial crises and, in energy exporters, because of the collapse in oil prices. In the average EMDE, over a five-year horizon, a recession combined with a financial crisis could lower potential output by almost 8 percent while, in the average EMDE energy exporter, a recession combined with an oil price plunge could lower potential output by 11 percent.
Cumulative EMDE potential output response after recessions and financial crises
Hit to productivity
Past epidemics were associated with 6 percent lower labor productivity and 11 percent lower investment five years later in affected countries.
Cumulative labor productivity response after epidemics
Groundwork for long-term growth
while setting the stage for stronger long-term prospects. As the world emerges from the pandemic, it will also be critical to strengthen the mechanisms to prepare for, prevent, and respond to epidemics before the next one strikes. Less than 5 percent of countries around the world entered this pandemic scoring in the highest tier for their ability to respond to and mitigate the spread of an epidemic.