Miscellaneous Knowledge Notes

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Drivers of Public Debt in East Asia and Pacific Economies

(World Bank, Washington, DC, 2022-12-16) Islamaj, Ergys ; Samano, Agustin

Public debt in developing East Asia and Pacific (EAP) economies has increased markedly since the recession in 2020 induced by COVID-19 pandemic. This brief uses standard debt dynamic accounting decomposition to quantify the main drivers of debt accumulation in developing EAP countries since 2000. In the aftermath of the COVID-19 pandemic, larger primary deficits have been the main drivers of the increase in the ratio of public debt to GDP in most developing EAP economies. While strong GDP growth and, to a certain extent, inflation have helped deflate public-debt-to-GDP ratios during the past two decades, they have, on average, been more muted since the COVID-19 shock.
The Road Not Taken?: Responding to the Energy Price Shock in East Asia

(World Bank, Washington, DC, 2022-11-17) Pollitt, Hector ; Islamaj, Ergys ; Kitchlu, Rahul ; Le, Duong Trung ; Mattoo, Aaditya ; Mattoo, Aaditya

Several countries in East Asia have increased fossil fuel subsidies to keep consumer prices lower than currently high international prices. These subsidies are discouraging the shift in consumption away from fossil fuels, while high prices are encouraging investment in new fossil fuel infrastructure. Providing income transfers instead of price subsidies would encourage consumption of cleaner alternatives, while softening the welfare loss. And subsidizing investment in renewables would avert the risk of being locked in to fossil fuels. The total cost need not be higher than that of fossil fuel subsidies.
Managing Long COVID in East Asia and the Pacific

(World Bank, Malaysia, 2021-10-07) Arur, Aneesa ; Islamaj, Ergys ; Kim, Young Eun ; Le, Duong Trung ; Mattoo, Aaditya ; Somanathan, Aparnaa ; Mattoo, Aaditya

The highly contagious Delta variant is fueling new outbreaks in East Asia and the Pacific (EAP). It is becoming evident that COVID-19 (coronavirus) is not leaving any time soon and may be here to stay. Countries with high vaccination coverage show, however, that transition to a relativelybenign phase of "managed endemicity" may be possible. At current trends, and given vaccine availability, many EAP countries are expected to vaccinate more than 60 percent of their populations by the first half of next year. Achieving and sustaining high coverage will require improving distribution capacity, overcoming vaccine hesitancy, and expanding regional production of vaccines to ensure reliable supplies for persistent COVID-19. Countries will also need to sustain the process of testing, tracing, and isolation, as well as precautions such as social distancing and wearing masks. Finally, countries need to strengthen their health systems to cope with long COVID.
Demand and Supply Dynamics in East Asia During the COVID-19 Recession

(World Bank, Malaysia, 2021-05-24) Islamaj, Ergys ; Ruch, Franz Ulrich ; Vashakmadze, Eka

The COVID-19 (coronavirus) pandemic has devastated lives and damaged economies, requiring strong and decisive policy responses from governments. Developing the optimal short-term and long-term policy response to the pandemic requires understanding the demand and supply factors that drive economic growth. The appropriate policy response will depend on the size and duration of demand and supply shocks. This Research & Policy Brief provides a decomposition of demand and supply dynamics at the macroeconomic level for the large developing economies of East Asia. The findings suggest that both demand and supply shocks were important drivers of output fluctuations during the first year of the pandemic. The demand shocks created an environment of deficient demand - reflected in large negative output gaps even after the unprecedented policy response - which is expected to last through 2021. The extant deficient demand is suggestive of continued need to support the economic recovery. Its size should guide policy makers in calibrating responses to ensure that recovery is entrenched, and that short-term supply disruptions do not lead to long-term declines in potential growth.
The Spread of COVID-19 and Policy Responses

(World Bank, Washington, DC, 2021-01-07) Islamaj, Ergys ; Kim, Young Eun ; Le, Duong Trung

Since early 2020, the COVID-19 (coronavirus) pandemic has spread to most countries and territories around the world. For many countries, the second wave of infections is turning out to be more serious than the first. Notwithstanding the global spread of the virus, public policy responses have varied across countries and regions. This brief analyzes the spread of COVID-19 and the effectiveness of policy efforts to contain the disease across a large number of countries. The findings suggest that public health measures - especially testing - and economic support policies are associated with effective containment of the disease, and thus are supporting fundamental prerequisites for a resumption of normalcy. This brief examines the evolution of COVID-19 and public policy responses across country groups around the world; presents an econometric analysis of the relationship between the spread of infections and the policy responses; and concludes with main policy implications.