The regional and local impact of the COVID-19 crisis is highly heterogeneous, with significant implications for crisis management and policy responses. This paper takes an in-depth look at the territorial impact of the COVID- 19 crisis across its different dimensions: health, economic, social and fiscal. It provides a comprehensive overview of national and subnational government response measures to manage the vaccination campaigns across levels of government and mitigate the territorial effects of the crisis. Finally, the paper offers a forward looking perspective on the crisis’ implications for multi-level governance, as well as points for policy-makers to consider as they build more resilient regions.
The health crisis.
The health crisis has markedly different outcomes across regions and municipalities within countries in terms of declared cases and related deaths. Regional disparities in mortality rates are high in some countries, reflecting heterogeneous access to health services, differing vulnerability to the disease (e.g. demographic criteria, different comorbidity rates, etc.) and the diversity of socio-economic conditions across places. In the early phase of the pandemic, densely populated urban areas were the hardest hit, but in the second half of 2020, and in 2021, COVID- 19 spread towards less dense regions in some countries. There is growing evidence in many countries that regions at the bottom of the income distribution and deprived neighbourhoods have higher mortality rates.
The economic crisis.
The economic impact of the COVID-19 crisis differs across regions. Regional economic specialisation in sectors directly or indirectly exposed to the crisis and participation in global value chains have amplified the impact of the crisis, especially in regions with a high share of SMEs Regions are also affected differently depending on “telework-ability”, which is compounded by digital divides. Even setting aside these digital divides, on average, the share of jobs amenable to remote working in cities is 13 percentage points higher than in rural areas.
Unemployment increased dramatically in many OECD regions during the second half of 2020 compared to the same period in 2019, with stark regional differences in Chile, the Czech Republic, Greece Mexico, and Spain, for example. In these countries, changes in the unemployment rate in the most affected regions were twice as high as in the country as a whole.
Subnational Finance:
Data for 2020 confirm the negative impact of the health and economic crisis on subnational government expenditure and revenue. This impact is however, of a lower magnitude than what initial surveys indicated in some countries, such as Finland, France, Germany, Japan, and Spain. This can be attributed, at least in part to significant central/federal government measures to support local finance, as well as savings in expenditures, and deferrals or cancellations of investment projects. However, considerable uncertainty over the longer term remains. Behind this are a number of factors. First, there are uncertainties around the health
situation and vaccine rollout. Second, many essential expenditures that were deferred in 2020 cannot be deferred indefinitely. Third, in many countries, tax revenues in 2020 reflected activities in 2019 not 2020. Fourth, the impact on subnational finance in 2021 and 2022 will depend on the continuation and extent of support provided by higher levels of governments.
Recovering from COVID-19
: Policy responses The differentiate regional impact calls for territorialised policy responses on the health, economic, social, fiscal fronts, and for strong inter-governmental coordination. Territorial dimension of health responses Many countries moved from an approach that was applied nationally when the crisis hit in spring 2020, to a more territorial and differentiated approach across regions. In this way they adapt the crisis responses to local needs and limit the costs of national lockdowns. In many countries, specific measures regarding masks, school and restaurant closures, and full lockdowns have been adopted for specific localities or regions to limit their economic impact, e.g. in Australia, Canada, Colombia, Finland, France, Germany, Italy, Spain and the UK. While such a differentiated territorial approach is natural in federal countries, where health responsibilities are largely decentralised, it is also increasingly seen in a number of unitary countries. Since mid-2020, regional and local governments have also been more actively adjusting their response measures to the local context. Beginning in December 2020, vaccination campaigns are being rolled out and implemented, with significant territorial and multi-level governance dimensions
.For the most part, vaccination campaigns are led by national governments. Their implementation, however, is generally in coordination with subnational governments and health agencies to better address local needs and demographic differences (i.e. the share of the regional population falling into vaccination-priority groups).
Challenges can arise when subnational governments were not sufficiently involved in design of the vaccination delivery strategy. Some countries are currently exploring adopting a territorial approach to vaccination campaigns focused on communities or regions with higher risk level or a higher incidence of COVID-19 cases. During the first quarter of 2021, significant challenges hindered vaccine deployment. Important challenges include limited vaccine supplies in some advanced economies and most developing countries due to constrained production capacity, and a highly inequitable and inefficient distribution of existing supply between countries. Varying capacity to plan and execute mass vaccination campaigns, in particular a lack of coordination across levels of governments and the effect of emerging viral variants of concern (VOCs) on the effectiveness of existing vaccines are also issues during the early phase of vaccination campaigns. Within countries, regional disparities in accessing vaccines are generally limited, which indicates that there is an effort to make access universal across regions but also shows that regions with the highest incidence have not been prioritised. In countries where regional disparities are significant, they are often driven by factors relating to health or demographic factors and therefore different shares of prioritized populations.
Vaccine uptake rates may also differ across regions due to differences in local preferences or vaccine acceptance.
Economic responses Governments have provided massive fiscal support to protect firms, households and vulnerable populations. Global fiscal support amounts to USD 13.8 trillion, with USD 7.8 trillion in additional spending and forgone revenue and USD 6 trillion in equity injection, loans and guarantees since March 2020. This is much more than what was provided during the 2008 global financial crisis. Many countries, and the EU, are directing new financing and reallocated public funding to crisis priorities, supporting health care, SMEs, vulnerable populations and regions particularly hit by the crisis. With social protection as a key responsibility, subnational governments are pivotal in supporting vulnerable populations, which are at high health and economic risk. Subnational governments also play an important –and growing –role in supporting SMEs and the self- employed. For example, in the EU 30% of surveyed subnational governments provided large direct support to businesses and the self-employed in 2020. While immediate fiscal responses concentrate on protecting workers, the unemployed and vulnerable populations, in the second half of 2020 many governments also announced large recovery packages focusing on public investment. These investment recovery packages target priority areas, which include the transition to a carbon neutral economy; digitalisation; the strengthening health systems; and social infrastructure. Given the territorial differentiation of COVID-19’s impact, and the level of
public investment in the hands of subnational governments (57%) it is crucial that recovery strategies have an explicit territorial dimension and involve all levels of subnational government early in their implementation. While this is the case in some countries, it remains a challenge for many.
The COVID-19 crisis has accelerated awareness of the urgent need to shift to a carbon neutral economy at all levels of government. Post-crisis recovery strategies are a unique opportunity for governments to allocate recovery funds to sustainable initiatives and take measures to reduce the carbon-intensity of economic activities. However, there are often significant gaps between intentions and the concrete policy measures that are adopted. At the national level, an analysis of OECD and OECD key partner countries’ recovery packages found that the USD 340 billion in green recovery measures announced so far is still an order of magnitude smaller than the overall amounts devoted to recovery measures: the spending allocated to green measures represents about17%of recovery spending or 2% of total COVID-19-related spending in OECD countries, Costa Rica (accession) and Brazil, China, India, Indonesia and South Africa(OECD, 2021[3]).
At the subnational level, a survey of local governments in the EU found that although more than two-thirds of the 300 regional and municipal respondents stated that the transition to a low-carbon economy should shape long-term regional development policy to a large extent, less than half were considering using recovery strategies to achieve green objectives. Different instruments have been activated to maintain or accelerate public investment projects at the subnational level, e.g. improving self-financing capacity, relaxing budget rules, increasing capital transfers and subsidies, easing the access to long-term projects on bank credit and capital markets and supporting projects preparation and implementation. Other financing mechanisms may be activated such as public-private partnerships schemes or equity financing.
Subnational finance
In 2020, almost all OECD countries introduced measures to support subnational finance. The measures included revenue-side measures, expenditure-side measures, financial management measures and measures related to fiscal and debt rules, including to facilitate the use of debt for short and long term needs. Revenue-side measures and measures related to fiscal rules and debt seem to be the most frequently applied. Prospects for 2021-2022 are highly uncertain. Some countries have announced the continuation of support packages in 2021. Yet, they could also be reduced, as well as targeted to the subnational governments most affected by the crisis (e.g. Austria, Chile, Costa Rica, France, Italy, Korea, Norway, Slovenia, Sweden). Crisis and recovery plans are also offering an opportunity to launch or accelerate local finance reforms in some countries (e.g. France, Iceland, Spain, UK).
Key Recommendations
- Ensure safe and fair access to vaccines across regions within countries through effective coordination mechanisms between national and subnational governments, for example by sharing dose delivery projections. This is particularly important as all levels of governments must anticipate the surge in supply and ensure that the logistics and infrastructure is ready as vaccine deliveries accelerate. Involve subnational governments in vaccination campaigns to ensure faster and better territorial coverage. Involving local actors, who are better informed about the local population and infrastructure, is essential to successfully reach people that need vaccines first (e.g. the elderly, people with pre-existing illnesses and healthcare workers) and relieving the pressure on the healthcare system.
- Consider adopting a “place-based” or territorially sensitive approach to recovery policies. Introduce, activate or reorient existing multi-level coordination bodies in order to minimise the risk of a fragmented recovery response. Use such bodies to refine strategies, develop solutions, and agree on decisions with profound economic, social,
and societal implications. Strengthen the quality of micro-level data within and between regions to improve understanding of the crisis and its impact.
- Support cooperation across municipalities and regions to help minimise disjointed responses and competition for resources during a crisis. Facilitate inter-municipal cooperation to support recovery strategies by ensuring coherent safety/mitigation guidelines, pooling resources, and strengthening investment opportunities, for example through joint borrowing. Actively pursue and promote cross-border cooperation in order to promote a coherent recovery approach across a broad territory (e.g. border closure and reopening, containment measures, exit strategies, migrant workers).
- Strengthen national and subnational-level support to vulnerable groups to limit further deterioration in circumstances and to strengthen inclusiveness in the recovery phase. Accomplishing this can include simplifying and facilitating access to support programmes, ensuring well-targeted services, introducing adequate and/or innovative fiscal support schemes, and identifying the needs for revising fiscal equalisation policies. Use digital opportunities (e.g. e-health, e-education) to help ensure continued service delivery, being sensitive to territorial, economic, and social disparities in access.
- Avoid withdrawing abruptly fiscal support. Continue helping subnational governments reduce the gap between decreasing revenues and increasing expenditures resulting from the COVID-19 crisis to avoid sharp cuts in subnational operating and capital expenditure, resulting in underfunded and unfunded mandates. Foster subnational governments’ participation in recovery plans. Foster multi-level and multi-stakeholder dialogue and fiscal coordination, for example with national associations of subnational governments and other consultative bodies. Promote coordinated responses to the crisis’ fiscal impact, using shared evidence and data, and a forward-looking perspective.
- Ease administrative burden on core regional and local services and those helping SMEs and the self- employed. Subnational governments, very aware of local circumstances, can act as brokers of financial support to SMEs and the self-employed. Help SMEs adopt new working methods, including digital technologies.
Innovation in public services fostered by the crisis, including services supporting the transition toward a greener and circular economy, represents an important link between subnational government action and the SME environment
- Coordinate public investment recovery packages across levels of government, as highlighted by the OECD Recommendation on Effective Public Investment across Levels of Government. Key lessons from the 2008 financial crisis need to be kept in mind throughout the Notable among these are ensuring intergovernmental coordination, building sub-national government investment capabilities, investing at the right scale and avoiding stimulus coming at the cost of good investment and risk management practices. Subnational governments, regional and local, should be involved in the territorial implementation of national investment strategies early on.
- Balance short-term stimulus objectives with long-term priorities (e.g. sustainability, resilience, smart infrastructure). Allocate recovery funds to the transition to carbon neutral economies at all levels of government. Introduce measures to overcome the digital divide in crisis recovery strategies plans and investment plan and strengthen the support from the central level for the digitalisation processes especially for SMEs,poor er urban, and remote, rural communities. Help target public investment strategies to green, digital and inclusive priorities by introducing conditionalities.
- Support subnational public investment over the medium-term to avoid the massive cuts that occurred after the 2008 crisis. In addition to improving self-financing capacity, other possible avenues include those offered various classical fiscal instruments, such as temporarily relaxing budget rules for capital spending, increasing capital transfers and subsidies, easing the access to long-term projects on both credit and financial markets and supporting project preparation and implementation.
- Reconsider regional development policy to build more resilient regions, better able to address future shocks. This implies re-evaluating regional policy objectives, including with respect to their urban/rural equilibrium, the climate imperative, the digital divide, the balance between tangible and intangible assets Looking ahead The COVID-19 pandemic has challenged governments immediately activate a maximum of regional development and governance policy levers. It has further highlighted the need for a place-based approach to crisis management and recovery and spotlighted the importance of effective leadership.
It provides evidence for the importance of coordination, consultation, and a collaborative approach among government and non-government actors. This crisis has also underscored the fundamental role that trust in public institutions plays –not only for crisis management but also for health outcomes –and the power of effective communication with stakeholders and citizens. The COVID-19 crisis is “revealing” and “accelerating” new trends in regional development policymaking.
Revealing:
The crisis has shed new light on a lack of regional resilience and amplified existing weaknesses, including territorial disparities in access to healthcare and housing, demographic changes, digital gaps across metropolitan and rural areas. In many countries it has brought to the fore the consequences of a decade plus of under-investment in regions and municipalities. There is a risk that these weaknesses will persist well into the medium-long term.
Accelerating:
The COVID-19 crisis has considerably accelerated several mega-trends, such as digitalisation and the imperative to transition to a low carbon economy. The increase in remote working could be a game-changer for the spatial equilibrium between urban and rural areas, which could have significant implications for regional development policy. COVID-19’s differentiated impact on communities, regions and countries is inspiring broader discussion on the how to increase resilience and how to be better prepared for future health, economic, social or climate- related shocks. Governments at all levels are being led to consider or reconsider more accessible basic services regardless of where people live, reducing digital divides, and ways of achieving net-zero carbon emissions.
COVID-19 has caused the most serious health crisis in a century and the most serious economic crisis since the Second World War.COVID-19 has spread to almost all countries and has infected more than 140million people around the world, resulting in 3million deaths as of April 2021.Governments around the world are facing sudden simultaneous health, economic and social challenges. The exit strategy from the crisis is not linear and different regions of the world have adopted different strategies. In Europe, countries take “stop and go” decisions on lockdowns, and it is likely to remain so until a significant share of the general population has received approved vaccines. In Asia-Pacific, many countries have adopted the zero-COVID strategy requiring more stringent border controls and strict localised lockdowns to curb new outbreaks. Vaccination campaigns in some countries began in December 2020. While the WHO has not given a precise estimate on the proportion of the population that must be vaccinated to attain herd immunity(WHO, 2021[1]), which might not be achievable at all, vaccinating the global population against COVID-19 is the only long-term strategy to contain the coronavirus crisis by protecting individuals. Yet, it presents a significant logistical challenge in all countries and, with it, significant territorial and multi-level governance implications. Beyond the health and human tragedy of COVID-19, the pandemic triggered the most serious economic crisis since World War II.
Most economic sectors are affected, whether through lockdown measures, disrupted global supply chains, weaker domestic and foreign demand for goods and services, subdued international tourism (OECD, 2020[5])and a decline in business travel. Measures to contain the virus’ spread have hit SMEs and entrepreneurs particularly hard (OECD, 2020[6]). Unemployment levels and the number of job seekers have increased, sometimes dramatically.
World output is expected to reach pre-pandemic levels by mid-2021 but much will depend on the race between vaccines and emerging variants of the virus (OECD, 2021[7]). While global macroeconomic projections have improved markedly thanks to the effective deployment of vaccines and the disbursement of additional fiscal
stimulus in some countries, real global GDP is only expected to return to pre-pandemic levels in the second half of 2021 (Figure1),with a heterogeneous pattern across countries and regions, depending on the stringency of containment measures and degree of vaccine roll-outs. Estimates in the OECD’s March2021Economic Outlook, show that real global GDP contracted by 3.4%in 2020, but anticipate growth of 5.6%in 2021and 4.0% in 2022. OECD unemployment has reached 7.2% in 2020from 5.4% in 2019(OECD, 2020[8])and is expected to peak at7.4% in 2021 before decreasing to 6.9% in 2022(OECD, 2021[7])
The Countries need to find local Solutions to end the depression caused by COVID-19
(Prof) Dr Kannan Vishwanatth
The Author is an academic researcher. Armed with Chemical Engineering degree, Dr Kannan Vishwanatth is currently the promoter Director of Hong Kong-based pharmaceutical company Rupus Global Limited.Dr Kannan Vishwanatth is a global opinion maker of contemporary issues & a much sought after speaker in various international forums. Dr Kannan is credited with reputation for innovation, social connections, track record for value creation and investor expectations for value creation. As a Research Scholar, Dr. Kannan has published many research papers & is associated with many top notch International Institutions as Editorial Reviewer. Dr. Kannan Vishwanatth is a global Citizen & a strong believer in Corporate Social Responsibilities. Over the years, Dr. Kannan has slowly transitioned away from Corporate World and into philanthropic & academic ventures.
Dr. Kannan Vishwanatth, 47 years, is the Founder and Promoter & Managing Director of our Company. He holds a doctorate in Business Management (Ph.D.). He has an experience of 20 years in the pharmaceutical industry. As the Promoter & Managing Director, Dr. Vishwanatth, has been the backbone of our Company’s operations and is involved in formulating the Company’s strategy. Under his guidance, our Company, ventured into new geographies with a wide product range in various therapeutic segments. His vision and value system have guided the organization towards profitable sustainability. Believing in delegation of responsibility, Dr. Vishwanatth created a professional team and expects Rupus Global Limited to emerge as a global player across multiple therapeutic segments. Armed with Chemical Engineering degree, Dr Kannan Vishwanatth is currently the promoter Director of Hong Kong-based pharmaceutical company Rupus Global Limited.Dr Kannan Vishwanatth is a global opinion maker of contemporary issues & a much sought after speaker in various international forums. Dr Kannan is credited with reputation for innovation, social connections, track record for value creation and investor expectations for value creation. As a Research Scholar, Dr. Kannan has published many research papers & is associated with many top notch International Institutions as Editorial Reviewer. Dr. Kannan Vishwanatth is a global Citizen & a strong believer in Corporate Social Responsibilities. Over the years, Dr. Kannan has slowly transitioned away from Corporate World and into philanthropic & academic ventures. Dr. Kannan Vishwanatth, 40 years, is the Founder and Promoter & Managing Director of our Company. He holds a doctorate in Business Management (Ph.D.). He has an experience of 20 years in the pharmaceutical industry. As the Promoter & Managing Director, Dr. Vishwanatth, has been the backbone of our Company’s operations and is involved in formulating the Company’s strategy. Under his guidance, our Company, ventured into new geographies with a wide product range in various therapeutic segments. His vision and value system have guided the organization towards profitable sustainability. Believing in delegation of responsibility, Dr. Vishwanatth created a professional team and expects Rupus Global Limited to emerge as a global player across multiple therapeutic segments.
