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Priorities for Saving the Private Sector

With investment plummeting across the developing world, governments urgently must extend assistance to the private sector to ensure a strong recovery when the time comes. Given that resources are strained, policymakers should approach the problem with three guiding principles in mind.

WASHINGTON, DC – For most countries, navigating the protracted economic slump brought on by COVID-19 is starting to look more like a marathon than a sprint. According to our estimates at the International Finance Corporation (IFC), domestic private investment and foreign direct investment in emerging economies will fall this year by almost $700 billion and $250 billion, respectively, and may not return to pre-crisis levels until 2023.

Worse, the crisis is exacting a massive toll on the world’s poor and most vulnerable, jeopardizing decades of hard-won development gains. The World Bank warns that we are about to witness the first increase in global poverty since 1998, with up to 100 million people being pushed into extreme poverty.

How governments and firms navigate this uncertain period between shock and recovery will determine whether there is a sound economic foundation upon which to revive employment, long-term growth, and global development efforts. The situation demands that we reorganize and fix markets. Many companies have had no choice but to reshape their business models, now that the pandemic is accelerating changes in how we work, consume, and communicate. These trends could reshape entire industries, creating opportunities for those with the innovative capacity.