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G L O B A L E C O N O M I C P R O S P E C T S | J A N U A R Y 2 0 2 1
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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
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