Global outlook c h a p t e r 1

partnerships, to increase public investment. This 
type of government spending has large multiplier 
effects in countries where the stock of public 
capital is low (Izquierdo et al. 2019). 
Environmental protection policies and regulatory 
reform to improve energy efficiency are also vital 
to improving long-run climate, health, and growth 
outcomes (IMF 2020g). 
Improving governance
Improving governance is also urgently needed to 
overcome development obstacles exacerbated by 
the pandemic and foster an environment 
conducive to higher long-run growth. Structural 
reforms that raise the quality of economic 
governance can facilitate the process of sectoral 
reallocation 
and 
structural 
transformation 
accelerated by the pandemic, while increasing 
productivity and investment (figure 1.23.E; box 
3.2). Such policies include trade liberalization and 
regulatory reform to increase global value chain 
participation, tax reform, and enhanced contract 
enforcement (Chari, Henry, and Reyes 2020). 
Social safety nets will also need to be strengthened 
to cushion the temporary adverse impacts on 
employment of productivity-enhancing reforms 

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and accelerated investments in automation and 
digitalization.
Reducing corruption is paramount in light of the 
expansion of government activity induced by the 
pandemic (World Bank 2020p). Among other 
factors weighing on institutional quality, 
corruption weighs on the effectiveness of resource 
allocation (Avellan, Galindo, and Leon-Diaz 
2020). Addressing corruption can play a crucial 
role in bolstering the recovery. Fostering a more 
predictable investment climate can help countries 
attract FDI, seize new trade opportunities brought 
on by ongoing global value chain reconfiguration, 
and address balance of payments difficulties 
(World Bank 2020q). Reducing corruption can 
also help increase the quality of government 
expenditures, the effectiveness of social benefit 
systems, and, by boosting government revenues, 
the amount of fiscal space (Peisakhin and Pinto 
2010).
Enhancing debt transparency, in part by adopting 
sound debt management practices, can support a 
durable recovery by fostering public trust and 
macroeconomic stability (Bulow et al. 2020; 
Malpass 2020). A firm commitment to enhancing 
debt transparency can help countries assess and 
manage the sharp accumulation in external debt 
brought on by the pandemic. Furthermore, it can 
also facilitate the establishment of sustainable debt 
covenants for public and private stakeholders, 
thereby increasing the fiscal space to fund growth-
enhancing policies (World Bank 2020r). There 
remains considerable scope to increase debt 
transparency across EMDEs (figure 1.23.F).
Global coordination and cooperation
The COVID-19 pandemic is a truly global crisis 
that necessitates a coordinated global response 
(World Bank 2020s). Only once the pandemic is 
effectively managed in all countries will individual 
countries be safe from resurgence, allowing
global growth outcomes to improve materially 
(Ghebreyesus 2020). Nevertheless, the resources to 
contain the pandemic and cushion its severe 
health, social and economic consequences are 
unequally distributed across countries. Although 
many EMDEs deployed unprecedented fiscal 
stimulus compared to past crises, their policy 
response was constrained by limited fiscal space 
and was insufficient to address the pressing needs 
of their vulnerable populations (Gates and Gates 
2020; Reinhart and Reinhart 2020). 
Given the pandemic’s lingering effects across 
fiscally constrained EMDEs, there is a pressing 
need for the global community to collaborate in 
alleviating debt burdens, particularly for the 
poorest countries (Shetty 2020). For example, the 
Brady Plan of 1989-94 achieved external debt 
reductions of about one-third for the 18