THE $10 TRILLION RESCUE: HOW GOVERNMENTS CAN DELIVER IMPACT - MCKINSEY
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Public Sector Practice
The $10 trillion rescue:
How governments can
deliver impact
Governments have announced the provision of trillions of dollars
in crisis relief, but translating that into sustained recovery will
not be easy.
by Ziyad Cassim, Borko Handjiski, Jörg Schubert, and Yassir Zouaoui
© Yuichiro Chino/Getty Images
June 2020The COVID-19 crisis is one of the worst health — highlight the critical questions that governments
emergencies the world has witnessed for a century, will need to consider as they shift the focus from
and its economic impact could be just as steep. short-term relief to the stimulation of economic
While it took several quarters for unemployment recovery for the long term
to peak in other crises, the economic shock of the
COVID-19 crisis has been larger than that of any
previous crisis—and it materialized within weeks. Governments respond with
Five weeks into the crisis, the weekly number of unprecedented spending: $10 trillion
jobs lost in the United States continues to exceed and counting
any pre-COVID-19 record. In some sectors, demand Our benchmarking of stimulus actions taken by
came practically to a halt in a matter of days as a 54 countries shows significant variation in the size
result of lockdown measures. of the response, with some countries committing
to spend as much as 40 percent of GDP (Exhibit
Governments’ economic responses to the crisis 2). Despite experiencing similar GDP losses and
is unprecedented, too: $10 trillion announced just undergoing in-line lockdowns (both in stringency
in the first two months, which is three times more and duration), most emerging-market countries’
than the response to the 2008–09 financial crisis stimulus packages have significantly lower spending.
(Exhibit 1).1 Western European countries alone have
allocated close to $4 trillion, an amount almost Given the broad global impact of the COVID-19 crisis,
30 times larger than today’s value of the Marshall few populations, businesses, sectors, or regions
Plan. The magnitude of government responses has have been able to avoid the knock-on economic
put delivery into uncharted territory. Governments effects. That means government measures have
have included all shapes and forms in their stimulus had to support large parts of the economy in a very
packages: guarantees, loans, value transfers to short time to maintain financial stability, maintain
companies and individuals, deferrals, and equity household economic welfare, and help companies
investments—as if advice from all modern schools of survive the crisis (Exhibit 3). In addition, countries
economic thought has been applied at the same time. have tended to escalate their interventions as the
crisis increases in severity and lockdowns persist .
But is it working? Nine of ten countries in our data set have already
announced at least one additional financial-relief
The crisis is far from over, and recent consumer or -stimulus package. Two-thirds of countries
surveys show that spending is not coming back have announced three or more packages, while a
yet.2 This article, based on analysis of the economic few countries have announced as many as six or
responses of 54 of the world’s largest economies, seven packages.
representing 93 percent of global GDP, has the
following aims: Monetary-policy measures were the first-line
response to the crisis. In early March 2020, more
— present the breadth of measures that than 60 percent of total stimulus came from liquidity
governments have undertaken to support injections (Exhibit 4). At the most recent count, while
companies and citizens more than 90 countries had used some form of
liquidity injection, this had fallen to 15 percent of the
— assess how the distinct choices being total response, as other measures came online. 3
made by countries will affect both their
short-term welfare and their long-term
economic trajectories
1
Includes guarantees, deferrals, loans, value transfer, and equity investments.
2
“Global surveys of consumer sentiment during the coronavirus crisis,” May 2020, McKinsey.com.
3
Forty-three countries (excluding eurozone countries, El Salvador, and Panama) have independent monetary policies.
2 The $10 trillion rescue: How governments can deliver impactThe $10 trillion rescue: How governments can deliver impact
Exhibit 1 of 6
Exhibit 1
Across countries, economic-stimulus responses to the COVID-19 crisis outsize
those to the 2008 financial crisis.
Economic-stimulus crisis response, % of GDP1
2008 financial crisis² COVID-19 crisis
33.0
21.0
14.6 14.5
3.5 2.2 1.4 1.5
Germany Japan France United Kingdom
12.1 11.8
10.0 8.6
5.5
4.9
2.8 2.9
1.2 0.6
United States Canada India South Africa Brazil
1
2019 GDP taken into account for values related to COVID-19 crisis.
2
Data published by International Monetary Fund in March 2009; includes discretionary measures announced for 2008–10.
Source: Global economic policies and prospects, International Monetary Fund (IMF), March 2009, imf.org; government sources; IHS Markit;
IMF; press search; The state of public finances: Outlook and medium-term policies after the 2008 crisis, IMF, March 2009, imf.org
Turning to household measures, the clear theme programs, primarily to support workers in the
across countries has been to provide immediate informal sector and the self-employed. Brazil,
relief to the most vulnerable, especially in countries for example, provided cash transfers to informal
without automatic stabilizers already in place. workers, while Morocco provided staggered
Egypt, for example, increased pensions, while subsistence aid to households of informal workers,
several countries in South America expanded based on the size of their households. Only around
unemployment insurance. Other countries sought 20 percent of governments we analyzed had taken
to protect those who were ill or homeless and steps aimed at longer-term resilience for individuals,
to provide food security. Indonesia, for example, such as jobs redeployment and reskilling.
expanded its social-welfare program to include food
assistance, while Taiwan provided coupons for use When it comes to business-specific measures,
at night markets, shops, and restaurants. Some the initial steps in most countries have focused
countries enacted broader income-distribution on protecting vulnerable small and medium-size
The $10 trillion rescue: How governments can deliver impact 3The $10 trillion rescue: How governments can deliver impact
Exhibit 2 of 6
Exhibit 2
Governments around the world have rolled out economic-assistance packages.
Size of stimulus package,1 % of 2019 GDP (not exhaustive)
0 10 20 30 40
1
Total number made public, collected, and analyzed until May 26, 2020; includes both monetary and fiscal measures. Monetary measures
included from International Monetary Fund do not include dollar values, because of challenges in measuring currency value.
Source: Government sources; IHS Markit; International Monetary Fund; press search
The boundaries and names shown on this map do not imply official endorsement or acceptance by McKinsey & Company.
enterprises (SMEs) and companies within the most Stimulus programs are split on whether they transfer
affected sectors: more than 90 percent of countries value to companies through revenues or cost
have released measures that specifically target reductions. Germany has provided direct payments
SMEs, and more than 50 percent have released to companies based on the size of the business, and
measures targeting tourism, transport, and travel. around 70 percent of countries have provided direct
The most common approach (enacted by more than support or compensation to reduce salary costs.
80 percent of countries studied) has been to release For example, Saudi Arabia is covering 60 percent
measures for debt restructuring and loan guarantees. of salaries for private-sector companies affected
by the COVID-19 crisis, and Australia announced
There is significant variation in how far countries the extensive JobKeeper payment that aims to
have gone to protect companies’ balance sheets. For subsidize the wages of up to six million workers
example, Germany’s loan guarantees amount to 29 through payments made every two weeks.
percent of its GDP, while the average is 4 percent for
other G-20 countries. Equity injections have been Rapid execution of such measures is critical, as
used by only around 10 percent of countries studied many SMEs struggle with cash flow. For example,
to date but may become more prevalent as we move the amount of time taken for funding to reach SMEs
toward recovery, as opposed to relief, measures. in the United Kingdom and United States shows
4 The $10 trillion rescue: How governments can deliver impactThe $10 trillion rescue: How governments can deliver impact
Exhibit 3 of 6
Exhibit 3
Thus far, the announced stimulus measures have three primary objectives.
Tools used to attain 3 primary objectives (not exhaustive)
Liquidity injections¹ Regulation changes² Guarantees³ Deferrals⁴ Loans⁵ Value transfers Equity investments
1 Maintain
financial
Monetary-policy actions Provide quantitative easing/liquidity injections
Reduce interest rates
stability
Prudential and financial measures Relax adequacy requirements
2 Maintain
household
Support of critical needs Maintain household disposable incomes
Provide in-kind support
economic Ease household expenses/financial obligations
welfare
Employment measures Relax labor-market regulations
Peform job redeployment
3 Help
companies
Liquidity/cash-flow improvements Postpone government fees/receivables
Accelerate government payables
survive the Ease nondebt obligations
crisis
Balance-sheet interventions Provide equity interventions
Restructure debt and defer loans
Guarantee funds
Value transfers to companies through revenues Stimulate demand/government purchasing
Transfer cash to companies
Value transfers to companies through cost reduction Reduce/eliminate government fees
Compensate/reduce salary costs
Stabilize supply-chain costs
1
From central bank.
2
Includes labor, monetary, and macrofinancial regulations.
3
Includes credit and loan guarantees.
4
Includes postponement of outstanding payments and debt obligations (governmental and nongovernmental expenses).
5
Includes new government loans provided to companies and households.
that 25 to 32 percent of those enterprises had Three archetypes: How countries’
insufficient reserves to survive until loan funding responses today will influence their
from support programs could be accessed. And a pathways out of the crisis
recent Organisation for Economic Co-operation Despite the similarity of origin, governments
and Development (OECD) survey found that three- have taken different strategic approaches in their
quarters of small businesses in OECD countries had responses to the COVID-19 crisis. In our analysis
cash reserves for two or fewer months. 4 of 20 countries, we found three factors that seem
4
Alexander W. Bartik et al., How are small businesses adjusting to COVID-19? Early evidence from a survey, National Bureau of Economic
Research working paper, number 26989, April 2020, nber.org; “BCC Coronavirus Business Impact Tracker: Businesses not yet successfully
accessing government loan and grant schemes,” British Chambers of Commerce, April 8, 2020, britishchambers.org.uk; Coronavirus
(COVID-19): SME policy responses, Organisation for Economic Co-operation and Development, May 19, 2020, oecd.org; “Help for small
businesses needs to be scaled up to prevent collapses as they face cashflow crisis,” blog entry by Carsten Jung and Oscar Watkins,
April 9, 2020, ippr.org.
The $10 trillion rescue: How governments can deliver impact 5The $10 trillion rescue: How governments can deliver impact
Exhibit 4 of 6
Exhibit 4
The global governmental stimulus response to the COVID-19 crisis exceeds
$10 trillion.
Cumulative size of stimulus response1 by week, $ trillion (not exhaustive)
12
Unspecified² Equity
10
investments
Regulation
changes
Loans Deferrals
8
Value transfers
6
Liquidity injections
(central bank)
4
2
Guarantees
0
Feb 14, 2020 May 18, 2020
1
Total number made public, collected, and analyzed to date (across 54 countries for which stimulus-package-size information is studied).
2
Difference between stimulus-package sizes announced and sum of measures for which exact size is available or can be estimated.
Source: Press search; WHO
to shape how economies have responded: the one, they provide useful frameworks for helping
degree of outbreak and intensity of lockdown (a governments consider how the distinct choices
proxy for the severity of the crisis), the preexisting being made now will affect both the short-term
social- and business-support measures already welfare of their people and companies and their
in place, and the structure of the economy—for countries’ long-term economic trajectories. The
example, the mix of self-employed workers, SMEs, archetypes also provide guidance on the constraints
and large corporations. and policy options available, in each context, as
governments pilot their countries through the crisis
The combination of those three factors gives and onto a sustainable recovery path.
rise to three response archetypes: coordinated-,
liberal-, and emerging-market economies. While Coordinated-market economies
the archetypes are not necessarily exhaustive, and Countries with coordinated-market economies
countries may have characteristics of more than have leveraged strong balance sheets and existing
6 The $10 trillion rescue: How governments can deliver impactCountries with liberal-market economies
face greater short-term risks than
do those with coordinated-market
economies but have greater flexibility
for long-term dynamism.
measures to respond rapidly and at scale to 14 percent in Malaysia, and just 6 percent in Nigeria)—
protect businesses and jobs, but they must shift as an effective means of response to alleviate
to longer-term measures and beware of future household expenses.6
stagnation. Austria, Denmark, Finland, Germany,
the Netherlands, Sweden, and South Korea all Business-specific measures in such countries
fit this archetype. The countries generally have have been focused on SMEs, given their clear
strong budget policies (several have had a recent importance in the fabric of economies. Looking
budget surplus) and strong institutions that can ahead, the current emphasis on immediate relief
implement measures quickly. Their economies are means they may need to make a shift to enact
more regulated than are those with liberal-market longer-term measures. Additionally, as businesses
economies, and they have stronger labor policies are supported across the board, the countries will
and a large SME footprint. The gross value add still need to ensure that companies they fund do
generated by their SMEs is more than 60 percent not stagnate—and that they are encouraged to
of GDP, compared with an average of 43 percent in invest in strategic priorities (such as R&D, energy
liberal-market economies. 5 efficiency, reskilling, and employment) to maintain
competitiveness and “future proof” their economies.
Often, such countries already have initiatives in place
to assist vulnerable households, help finance wages, Liberal-market economies
and shift workers to part-time work when demand Countries with liberal-market economies face
falls. More than 90 percent of their populations are greater short-term risks than do those with
covered by social-protection floors, with Germany coordinated-market economies but have greater
and the Scandinavian countries spending 25 to 29 flexibility for long-term dynamism. The group
percent of GDP on social protection (which is more includes Australia, Canada, the United Kingdom,
than the 20 percent average in OECD countries). and the United States. A key feature here is a
Their responses are swift, large, and aimed at limited framework of preexisting measures to
shoring up business through loan guarantees, protect households—the countries in this archetype
equity injections, and fiscal-policy adjustments. spend 17 to 20 percent of GDP on social protection.
Scandinavian countries have been able to leverage Their economies skew more heavily toward big
their high tax revenues—39 to 45 percent of GDP corporations than do those with coordinated-
(compared with 24 percent in the United States, market economies, with a comparatively smaller role
for SMEs, and flexible labor policies are dominant.
5
“Small and medium-sized enterprises: An overview,” Eurostat, November 25, 2019, ec.europa.eu; “Small businesses generate 44 percent of
U.S. economic activity,” U.S. Small Business Administration, January 30, 2019, advocacy.sba.gov; “SME structure and business dynamism:
Trends and performance in productivity and wages,” in OECD SME and Entrepreneurship Outlook 2019, Paris, France: OECD Publishing, 2019.
6
Global Revenue Statistics Database, Organisation for Economic Co-operation and Development, April 15, 2020, oecd.org.
The $10 trillion rescue: How governments can deliver impact 7The limited degree of automatic coverage rates, postponements of government fees, and
for workers and businesses drives a focus on increased access to financing. Looking ahead, the
emergency support-of-wage bills for companies countries will need to be innovative with the limited
and direct transfers to individuals. More companies funding at their disposal, targeting resources to
will fail in such economies, and the reliance on the households and businesses that are most
massive cash transfers in those countries will vulnerable and to the sectors that will be most
increase the pressure to build a robust digital critical in the recovery.
infrastructure. However, creative destruction in the
least resilient sectors will provide more flexibility to Different archetypes, different trade-offs
pivot and emerge from the crisis stronger and more and choices
competitive, provided that economic shutdowns The shape of post-COVID-19 economies may
do not last too long, as unemployment can become depend on governments’ actions today. Notably,
sticky, driving up costs and dampening consumption there could be a trade-off between buying stability
in the longer term. and competitiveness. For example, some countries
with coordinated-market economies have protected
Emerging-market economies the status quo by enacting longer-term measures
The crisis has severely affected many emerging- (large-scale guarantees and equity injections) to
market economies, and the countries in that provide sustainability and protect jobs, while some
archetype will need to be innovative and highly countries with liberal-market economies have
targeted with limited funding. Examples here provided relief to those who have lost income or
include Egypt, Kenya, and Nigeria. Southeast Asian become unemployed. This can be seen in the type
countries, such as Indonesia and the Philippines, of funding: countries with liberal-market economies
have managed to curtail large outbreaks of COVID- have provided approximately 60 percent of total
19 (as compared with Europe and North America) relief measures in direct value transfers and loans,
but still face many of the same challenges as compared with only around 10 percent in countries
other emerging markets. The countries have large with coordinated-market economies, which have
informal sectors in their economies and limited spent around 80 percent of stimulus measures
resources, which has led to more modest relief and on guarantees.
stimulus packages—typically, considerably less than
10 percent of GDP. The effects are already starting to emerge.
According to the International Monetary Fund, the
Countries with emerging-market economies face unemployment rate in the United States is expected
a funding gap: their central banks have limited to increase threefold (to 10.4 percent, from 3.7
“headroom” to intervene, and they have lower debt percent) from the fourth quarter of 2019 to the
resilience because of higher debt-to-GDP ratios fourth quarter of 2020. The unemployment rate in
and higher costs of debt. Egypt, for example, spends Germany is expected to increase marginally (to 3.9
as much as 9.6 percent of its GDP on servicing percent, from 3.2 percent) over the same period.
its debt. Monetary tools are also used to a lesser
degree (liquidity injections are 1.7 percent of GDP However, keeping unviable companies alive may
to date, compared with more than 5 percent in prevent seizing the crisis as an opportunity to adapt
many advanced economies), with more vulnerable and pivot to lasting changes, such as an increased
currencies limiting the ability of central banks to requirement for digitization and automation.
intervene. Countries with fewer protections in place that are
focusing on protecting employees while providing
With very little room to support businesses, such lower long-term support for companies may give
countries are mainly relying on donor support. themselves the opportunity for a fresh start—
Efforts generally focus on vulnerable households. and shape more future-proof economies as a
Typical measures include reductions in lending result (Exhibit 5).
8 The $10 trillion rescue: How governments can deliver impactThe $10 trillion rescue: How governments can deliver impact
Exhibit 5 of 6
Exhibit 5
Several factors shape how countries respond to the COVID-19 crisis.
Factors shaping response by economy type Germany Sweden
Finland
Netherlands
High 100 Canada
Bubble size = COVID-19
cases per capita
UK Norway
Denmark
Austria
Australia US
Korea
Population
covered by
at least 50
one social
protection, %
Egypt
Coordinated-
market
economy
Liberal-
market
economy
Kenya
Nigeria Emerging-
market
Low economy
0
30 35 40 45 50 55 60 65
Less Small and medium-size More
enterprises, % of GDP
Stimulus focus by type of economy
Cash transfers to households
Low High
Liquidity support for companies¹
Low High
Loan guarantees and debt restructuring
Low High
1
Includes loans, cash transfers, salary compensation, and waving of governmental fees and taxes.
The $10 trillion rescue: How governments can deliver impact 9Optimizing the effectiveness of In Peru, for example, authorities are leveraging
delivery: Considerations earlier successes in channeling government-to-
for governments person payment through accounts to increase
Ensuring the effective delivery of financial relief payments to old and new beneficiaries during the
will need to be a key priority for all countries. The emergency and are expanding the set of financial-
unprecedented size of the financial measures service providers.7 Pakistan has mobilized rapidly,
announced to date poses major challenges in using existing digital infrastructure to identify
pushing the money to those who need it first—and 12 million vulnerable households (70 million to
fast. Our review of selected countries’ delivery 80 million people). Applications for benefits have
mechanisms (Exhibit 6) shows that income-support been enabled through mobile phones, and funds
measures have taken from one day to more than are disbursed through 18,000 locations that have
two months to reach vulnerable populations. physical-distancing measures in place and use
And despite the surge in unemployment in many biometric verification of all beneficiaries. Around 70
countries, large portions of recently unemployed percent of the support to date has gone to women.
people have not been able to make claims on As part of setting up that relief effort, Pakistan is
unemployment-insurance funds. in the process of adding 3.5 million families to the
government database of the most deserving and
Our global scan of countries’ approaches to helping more than seven million people open bank
delivery suggests that there are three crucial accounts for the first time. 8
success factors. The first is to scale up social-
support infrastructure. Countries without sufficient Real-time tracking is critical to enable effective
infrastructure need to repurpose existing structures delivery. Traditional monitoring systems cannot do
or create new and innovative disbursement channels this job, because of the low frequencies and lengthy
rapidly. Morocco, for example, has enrolled in its time lags of data collection and processing (for
RAMED system more than two million households example, most countries will not find out until July
that were previously not eligible. 2020 what happened with GDP growth in the first
quarter of 2020). Two tools can help governments
Countries with existing social-support infrastructure make more effective decisions throughout the crisis:
have managed to support vulnerable populations dashboards with nontraditional, advanced analytics
immediately without the need for special response and data (updated daily or weekly) and regularly
measures. That resolves the need for special conducted surveys of core segments of households
distribution mechanisms to be built, as well-tested and businesses (for example, SMEs) to check their
systems are already in place. In Denmark, for pulse and identify any need for course correction.
example, kontanthjælp has already designated
current accounts for citizens, who are payed at the Of course, the use of digital platforms needs to
end of the month if they require social assistance. be coupled with stringent security measures,
such as raising user awareness on data leakage
A second key success factor for delivery, which and increasing monitoring capacity to prevent
supports the first, is to strengthen digital delivery. cyberattacks and fraudulent access of relief funds.
Digital delivery platforms have emerged as key Certain countries have already fallen victim to
instruments in delivering funds to households. fraudulent parties gaining access to funds.
Some of the quickest delivery vehicles have come
from emerging markets and are the more inspiring Last, but by no means least, it is critical that
success stories of the global response to date. governments design interventions in a way
7
World Bank Blogs, “Responding to crisis with digital payments for social protection: Short-term measures with long-term benefits,” blog entry
by Michal Rutkowski et al., March 31, 2020, blogs.worldbank.org.
8
Sania Nishtar, “COVID-19: Using cash payments to protect the poor in Pakistan,” World Economic Forum, May 5, 2020, weforum.org.
10 The $10 trillion rescue: How governments can deliver impactThe $10 trillion rescue: How governments can deliver impact
Exhibit 6 of 6
Exhibit 6
Governments around the world have used quick-acting and innovative-delivery
mechanisms in their stimulus packages.
Stimulus-mechanism examples (not exhaustive)
QUICK-ACTING MECHANISMS
Malaysia France Indonesia South Africa
15% discount on Suspension of water, gas, Deferral of import taxes, Acceleration of
monthly electricity bills electricity, and rent bills relaxation of rules on employment-tax-incentive
for hotels, travel and tax and social- value-added-tax refunds, reimbursement payments
agencies, airlines, contribution payments and 30% reduction (from biannually to
shopping malls, for small businesses in corporate taxes monthly) to increase
conventions, and heavily affected by approved for companies liquidity of compliant
exhibition centers COVID-19 crisis in 19 manufacturing employers
sectors
INNOVATIVE-DELIVERY MECHANISMS
Peru Kenya India Germany
A growing number of GiveDirectly online Combined use of national Online portal allows
financial-service platform assists in online ID system, employers to fill out
providers (eg, private providing digital cash mobile-phone numbers, detailed end-of-month time
banks, mobile money transfers to low-income and certain types of sheets to apply for
providers) conduct individuals by using financial accounts helps short-term work
government-to-person geographic targeting data lay out a digital pipeline compensation from Federal
payments to identify vulnerable for transferring benefits Employment Agency
groups to beneficiaries
Source: Government sources; International Monetary Fund; press search; World Bank
The boundaries and names shown on this map do not imply official endorsement or acceptance by McKinsey & Company.
that accelerates delivery. While broad income rather than save, what they receive. Some countries
distribution can be challenging when delivery have increased recipients’ propensity to spend by
mechanisms do not exist, several countries have providing in-kind support through coupons and
led the way by enacting immediate relief measures, food vouchers.
such as eliminating waiting periods before people
can claim unemployment benefits and subsidizing Expense mechanisms, even if deferring expenses,
or discounting basic utility fees for companies can be a much faster-acting measure when
and households. Furthermore, stimulus will only automatic social-support measures are not in
be effective if individuals and businesses spend, place. Our analysis of the total support provided
The $10 trillion rescue: How governments can deliver impact 11to households showed that some countries have 1. Green energy. Accelerate government
managed to provide up to 40 percent of the investment in clean energy and incentivize
average assistance to households by waiving companies to improve energy efficiency.
nondiscretionary and government expenses and
thereby offering households instant relief. Several Why it matters. Although COVID-19 is not
countries have implemented particularly rapid directly linked to climate change, public
measures. France, for example, has suspended opinion is in favor of recovery actions that
water, gas, electricity, and rent bills, as well as also address the green agenda. Close to 70
tax and social-contributions payments for small percent of surveyed respondents say climate
businesses affected heavily by the COVID-19 crisis. change should be prioritized in recovery efforts.
Malaysia has provided a 15 percent discount on Environmental and economic impact can be
monthly electricity bills for hotels, travel agencies, complementary: creating a low-carbon stimulus
airlines, shopping malls, and convention and program for one European country has been
exhibition centers. estimated to require an investment of between
€75 billion and €150 billion, which would
produce €180 billion to €350 billion of gross
Looking ahead: Planning now for value added and create up to three million jobs.9
the recovery
As we have discussed, the world’s economic 2. Digitization and the next technology wave.
response to date has focused on relief. Further Accelerate government digitization and support
interventions will likely be necessary to revive companies in adopting new technologies.
aggregate demand once economies reopen if
consumer and business sentiments do not fully Why it matters. Adoption of digital technology
rebound, resulting in muted spending and artificial intelligence (AI) was a fast-
and investment. accelerating trend even before the COVID-19
crisis. Digital technology is forecasted to rise
In the United States, for example, the $3 trillion to 66 percent absorption, from 37 percent, by
economic response to the COVID-19 crisis has 2030, whereas AI absorption is expected to
been allocated almost entirely to immediate relief increase to 50 percent, from 7 percent, over
measures. In contrast, the American Recovery and the same period.10 The shift to a contactless
Reinvestment Act of 2009 allocated 55 percent of economy, driven by the pandemic, will contribute
its total funding—approximately $450 billion—to to that acceleration. The United States has
stimulate industries and revive aggregate demand seen a 20 percent increase in preference
by investing in infrastructure expansions in the for contactless operations, with numerous
transport, healthcare, education, and energy industries adapting to this change.11 Payment,
sectors. retail, food, accommodation, education,
and health are among the areas that will be
While many of the lessons learned from recovery in significantly affected by the trend.
earlier economic crises can be helpful in designing
a recovery plan for the COVID-19 crisis, there are at 3. Shaping the workforce of the future. Upskill the
least four areas that are specifically relevant to the workforce to be able to remain productive in a
current context: future of increased automation.
9
“How a post-pandemic stimulus can both create jobs and help the climate,” May 2020, McKinsey.com.
10
Jacques Bughin, Michael Chui, Raoul Joshi, James Manyika, and Jeongmin Seong, “Notes from the AI frontier: Modeling the impact of AI on the
world economy,” McKinsey Global Institute, September 2018, McKinsey.com.
11
Rachel Diebner, Elizabeth Silliman, Kelly Ungerman, and Maxence Vancauwenberghe, “Adapting customer experience in the time of
coronavirus,” April 2020, McKinsey.com.
12 The $10 trillion rescue: How governments can deliver impactWhy it matters. Automation and AI will prompt or medical products and businesses struggling
large-scale workforce transition over the to maintain production. Looking ahead,
coming years. Even with today’s technologies governments and businesses will seek to build
and knowledge, 60 percent of occupations have resilience against future shocks.
around 30 percent of tasks that are technically
automatable. Many occupations will see growing
demand, while others will shrink, leading to
75 million to 375 million workers potentially Governments have acted quickly, with an
needing to switch occupational groups unprecedented outlay of fiscal spending, to
by 2030.12 respond to the immediate effects of the COVID-19
crisis, such as the surge in unemployment among
4. Resilience of supply chains and security of low-income groups. Immediate next steps include
essential goods. Support the creation of local ensuring that what is announced gets delivered at
industries that will increase countries’ resilience. the expected pace and efficiently. Governments
will need to consider and adapt to a range of
Why it matters. From early on in the COVID-19 longer-term trends that have been accelerated by
crisis, governments and businesses alike were the crisis when shaping their recovery packages.
forced to go into emergency mode to mitigate Implementing an evidence-based approach that
the impact on supply chains. The crisis revealed considers the themes discussed in this article can
weaknesses or risks in various market segments, make a significant difference in recovery programs’
such as governments banning exports of food magnitude of economic impact.
12
Parul Batra, Jacques Bughin, Michael Chui, Ryan Ko, Susan Lund, James Manyika, Saurabh Sanghvi, and Jonathan Woetzel, “Jobs lost, jobs
gained: What the future of work will mean for jobs, skills, and wages,” McKinsey Global Institute, November 2017, McKinsey.com.
Ziyad Cassim is a consultant in McKinsey’s Johannesburg office; Borko Handjiski is an associate partner in the Dubai office,
where Jörg Schubert is a senior partner and Yassir Zouaoui is a partner in the Dubai office.
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