From the loss of education to the impact on businesses, jobs and the flow of finance for development, the economic scars of the pandemic will take time to heal.
A new report by the European Investment Bank argues that the long-term effects of the pandemic could weaken the prospects for development in poorer country for decades to come, in a process that economists call “scarring.”
“The pandemic has exposed investment needs in public health systems and digital infrastructure, as well as vulnerabilities due to a lack of fiscal space and low economic diversification,” the report’s authors write in Global Solutions, International Partnerships: The European Investment Bank Development Report 2021. “Vulnerable groups such as those in precarious or informal employment, economic migrants and women are most exposed to the economic fallout, exacerbating inequalities.”
The world was not doing enough for sustainable development, even before the pandemic, the report notes. The existing gap in financing for the achievement of the UN Sustainable Development Goals has been estimated at around $2.5 trillion. Growth in developing and emerging economies was, however, steadily reducing the number of people in extreme poverty. The recession caused by COVID-19 has reversed that process, already pushing some 120 million people back into extreme poverty.
Judged by the number of positive COVID tests, many developing countries, particularly in Africa, seem to have weathered the pandemic quite well. But even where infection rates have been lower, the report notes that not all countries have the same capacity to cushion the social and economic impacts.
The report notes a range of negative economic impacts from COVID-19 on developing countries. For example, African banks have seen an increase in bad loans and, in a survey of firms in seven African countries, the European Investment Bank found 24% of companies were in arrears on their loans.
The report, however, puts particular emphasis on the troubling impact of the pandemic on education.
At the initial peak of the pandemic in 2020, some 1.5 billion children were out of school due to school closures. The average child lost around half of their normal annual contact time with teachers. UNESCO estimates that the number of children not reaching an age-appropriate level of reading proficiency could rise by nearly 100 million to 581 million.
“The impact of this learning loss will last decades,” says the report by the European Investment Bank, the EU’s bank. “Not only might it take years for children to catch up with what they have missed, but lost learning may have long-term implications for earnings potential and economic development. Inequalities are likely to be exacerbated.”
One factor is that poorer children are less likely to have access to the internet and less likely to be able to benefit from online classes. Another is that the rise in poverty triggered by the pandemic is likely to cause more children of very low-income families to drop out of school. Girls are often more likely to be withdrawn from school, so the negative impact on the education of girls may be even greater than that for boys.
“An end to this disruption of education,” says the report, “cannot come soon enough.”