First edition of Liberia Economic Update calls for protecting the poor through safety net programs and implementing structural reforms to promote job creation and economic diversification
The COVID-19 pandemic continues to exact a toll on the global economy, and Liberia is facing its dire human and economic impact, with real GDP projected to contract by 2.6 percent in 2020, according to the first edition of the Liberia Economic Update.
The report shows that the human cost of COVID-19 could be high. The population living below the national poverty line is expected to increase from 55.5 percent in 2019 to 68.9 percent, which means that an additional 526,000 Liberians are at risk of falling into poverty. The authors also warn that economic growth could further slowdown if government’s policy response is delayed, not well-targeted, or if the external environment does not improve significantly this year.
“The World Bank welcomes efforts by the Liberia authorities to manage the community spread of COVID-19, building on the lessons from the Ebola experience,” said Pierre Laporte, World Bank Country Director for Ghana, Liberia and Sierra-Leone. “We recognize that mitigating the impact of the COVID-19 pandemic on the Liberian economy poses a complex and evolving challenge. Together with other development partners, we are supporting the government through financing and technical advice to address the crisis and transition to a robust economic recovery”.
Liberia’s near-term outlook is highly uncertain. Under the baseline scenario, a sharp rebound is expected with real GDP growth projected to rise to an average of 4.1 percent during 2021-22. However, under the downside scenario, real GDP is expected to recover more slowly, growing at an average rate of 3.7 percent in 2021-22. In both scenarios, the medium-term recovery will be underpinned by the post-COVID-19 normalization of economic activity and the implementation of structural reforms designed to alleviate constraints on productivity growth and support economic diversification.
“While the medium-term outlook is highly uncertain, there is cause for cautious optimism, said Khwima Nthara, World Bank Country Manager for Liberia. “Successful containment of the outbreak and implementation of the right mix of policies could position Liberia to benefit from an accelerating global recovery. Under such scenario, it will be important to ensure that the benefits of the recovery are widely shared through interventions that target the poor.”
The report proposes policy options in four critical areas that can help Liberia lay the foundation for the recovery in the immediate and short-term: (i) scaling up social protection programs; (ii) ensuring continued access to education; (iii) promoting the continuation of essential trade and market activities; and (iv) supporting financial-sector development to bolster the response to COVID-19.
In addition, the report argues that productivity-driven growth and diversification will be central to Liberia’s post-pandemic recovery, and highlights the importance of putting in place fiscal consolidation measures.
“An increase in official development assistance will temporarily bolster the government’s resources and provide the liquidity necessary to address urgent spending needs, and to maintain essential government services,” said Marina Bakanova, World Bank Senior Economist and the Lead author of the report.
The report also notes the importance of strengthening statistical capacity to promote evidence-based policy making and help monitoring the impact of COVID-19