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Shaping the macro-economy of low- and middle-income countries in response to Covid-19


Written by Sherillyn Raga, Dirk Willem te Velde

Policy-makers in high-income countries (HICs) responded to Covid-19 with doing ‘whatever it takes’ fiscal support measures that reached up to 23% of GDP (or a total of $16 trillion for 37 countries) as of September 2021. Meanwhile, in low-income countries (LICs), the response was about ‘what is possible’ within already limited fiscal resources, such that Covid-19 measures only amounted to 4% of GDP (or a total of $63 billion in 37 countries). Only 6.4% of the population in LICs has been fully vaccinated against Covid-19, compared to 70% in high-income countries on average as of 11 February 2022. There are important challenges around the deepening inequality and scarring effects as well as elevated concerns from accelerating inflation and mounting public debts.

Against this background, ODI and five think tanks in Bangladesh, Kenya, Peru, Sri Lanka and Tanzania set out to explore the impact of Covid-19 on the macro-economy; understand current policy responses so far; and analyse what more can be done to promote a rainbow recovery that is more inclusive, greener and transformative through country case studies. This synthesis paper, which consolidates key messages from the country case studies, related literature and policy discussions, highlights the following key findings and policy implications.