COVID | Emerging Markets | FX | Monetary Policy & Inflation
We were delighted to have former RBI governor (2013-2016) and former IMF chief economist (2003-2006) Raghuram Rajan as our podcast guest last week. We have distilled his key thoughts into a note in case you have no time to listen to the podcast – although I highly recommend you make some!
5 Stages of the COVID Recovery
Rajan outlined five key stages to managing the COVID crisis:
Relief: Relief measures for households and small business are needed while directly fighting the virus, but he cautioned that this stage can only last so long before stimulus measures drop back to more sustainable levels.
Repair & Restructure: Firms’ capital structures may need to be repaired (and debt restructured) to allow access to working capital, or to borrow to invest, once economies reopen.
Recovery: Targeted stimulus may be needed in this phase. Rajan gave the example of stimulating construction because the outdoor nature of building work leaves reduced risks of virus transmission while also boosting demand for raw materials.
Reforms: ‘Trying to fix the fault lines that have existed for some time but are even more highlighted by the pandemic’. Examples discussed were regenerating left-behind regions and reforms in employment.
Rajan highlighted that these steps may need to be combined or re-ordered to suit individual countries. But, in general, these are the five stages of dealing with the crisis.
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