Ms. Irina Yakadina (Senior Economist, Asia and Pacific Department, IMF), and
Mr. Tahsin Saadi Sedik (Senior Economist, Asia and Pacific Department, IMF)
Officials from Central Banks or Ministries interested in inequality.
Based on high-frequency labor surveys in Asia, we show that inequality has been increasing further during the COVID-19 pandemic as job losses have been concentrated among low-income workers. Moreover, the experience from past pandemics suggests that the adverse distributional effects could be even larger in the medium term—including, looking ahead, through the displacement of low-skilled workers by robots—and that the resulting higher levels of inequality could undermine social cohesion. This is especially salient for countries with already high inequality going into this crisis. Information from the IMF Policy Tracker shows that many Asian governments have implemented significant fiscal policy measures to mitigate the pandemic’s effect on the most vulnerable, with the impact depending on the initial coverage of safety nets, fiscal space, and degree of informality and digitalization. Although there is no one-size-fits-all solution, the model-based analysis shows that policies targeted to where needs are greatest are effective in mitigating adverse distributional consequences and underpinning overall economic activity and virus containment.
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