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Creating economic recovery and growth after COVID-19

Authors: Jessica Shannon and Ingrid Carlson

This article appears as part of PwC's Shaping tomorrow's government series: six chapters outlining the challenges and opportunities governments will face after the pandemic. For additional insight on the future of healthcare, education, climate and more, read the whole series. Please note that the opportunities and risks identified within each archetype are representative examples and are not exhaustive.

We’re in the midst of an asymmetrical recovery. In some countries , COVID-19 infection rates have fallen significantly, while in others, the virus remains difficult to control. But whether governments are actively managing outbreaks or returning to normalcy, economic recovery is central to their forward-looking agenda. For without a broad-based economic expansion, it is difficult to address other challenges, such as education and healthcare.

The International Monetary Fund recently raised its projection for economic growth in 2021 to 6%, up from 5.5%, and projects 4.4% growth in 2022. The upgraded outlook is based on how well the pandemic continues to be controlled, the efficacy of fiscal policy in mitigating economic damage and global financial conditions. Although businesses are the engines of the economy, governments create the environment and structure that enable enterprise to flourish (see ‘Government actions that support economic recovery’). How governments create and shape the environment for economic recovery—and the opportunities and challenges they face in doing so—will depend on two decisions they make about their approach.

Government actions that support economic recovery

Governments may make different choices when prioritising between preservation of existing businesses and net new creation. However, each is likely to evaluate and deploy a combination of the following interventions to support economic recovery.

Increasing investment

Increasing revenue, reducing cost, encouraging innovation, supporting workforce readiness.

• Providing direct capital injections through investments, loans and grants.
• Injecting capital into the banking system to spur investment.
• Increasing activity through public–private partnership structures.
• Attracting incoming foreign direct investment (FDI) and stemming the loss of outgoing FDI.

Increasing direct government spending on public-use assets, such as heavy infrastructure, facilities and climate retrofitting.

• Promoting domestic spending on domestically produced goods and services through tax-rebate checks, stimulus checks, low interest rates and/or increased tariffs on imports.
• Encouraging spending from international markets through renegotiated or new trade agreements.

Reducing taxes on businesses and/or individuals.

Providing concessions on government services (e.g., utilities).

Serving as a convener across industries, academia, think tanks, and design and development agencies.

Creating a strong enabling environment (e.g., intellectual property protections).

• Facilitating upskilling and reskilling programmes (e.g., for managerial skills, digital platforms and new industry expertise).

Two decisions shape governments’ approach to recovery 

All governments need to reduce debt and stimulate growth, but few governments aside from those with the largest economies have the option to simultaneously tackle their balance sheets and their economic recovery. Most will take actions that enable economic recovery by minimising expenditure or creating a positive return on investment, in ways that consider their global worldview, country context, legislative structure, political will and national ideology. Countries can make two decisions to help them understand the approach best aligned with their needs.

What will best drive my country’s immediate economic recovery—an approach that’s more locally orientated or globally orientated?

Countries that are at risk for acute and systemic insolvency, that have high levels of domestic inequality and/or disgruntled citizens, or whose supply chains for vital industries are at risk will probably prioritise local economic recovery. Countries that rely on global supply chains and financial flows, and believe global problems require global solutions, will probably lead with a globally orientated recovery.

What’s the best option for stimulating national economic growth—active involvement and oversight of issues or enablement of the private sector and local institutions?

This choice may be based on a government’s political party affiliation or structure and operating model. Other determinants include how deeply a government thinks it can trust in businesses and citizens to drive decisions, how agile it thinks public and private institutions are, and what core skill sets the government possesses. 

Click on a box to learn more about the general government archetype it describes.

Centralised government

Decentralised government

Local orientation

Global orientation

• Reach is broad and deep.
• Clear guidance is provided for states and municipalities to follow.
• National regulatory environment is robust.
• National industries and businesses are seen as part of the government's broader policy apparatus.
• Social services and programmes are subsidised and targeted.
• National and local issues are considered a higher priority than global challenges.
• Global issues are considered national priorities.
• Policies and programmes are used to drive alignment across state and municipal governments, the private sector, and civil society.
• National regulatory framework is robust.
• Government programmes are targeted at strategic industries aligned to the national agenda and those in which the private sector has a global competitive advantage.
• Nationalised social services are robust.
• International order is a strongly supported priority.
• States and municipalities are empowered to manage affairs largely independently, with limited oversight and guidance.
• Business has significant freedom in conducting operations in a way that maximises value and profit.
• Local governments are responsible for addressing social issues, within broad federal guidelines.
• International responsibilities and engagement in international affairs are limited and viewed through the lens of protecting national interests.
• The overall direction and tone of national policies is aligned to global interests.
• These priorities are achieved through a reliance on the private sector to find efficient, effective solutions.
• There is a broad regulatory framework and few protectionary policies.
• Local governments lead on social issues but are encouraged to align with global standards.
• Government strongly supports, but does not help lead, the global international order and commitments.

Opportunities and challenges for each archetypal approach 

Centralised and local governments  view a high-touch, centralised government and local empowerment as the primary drivers of economic recovery. Key questions for these governments revolve around how to best:

invest locally

identify and support industries that will drive economic recovery

promote domestic spending through cash-transfer programmes

protect local businesses from foreign competitors

safeguard industries that are vital to national security

promote exports

create a society that’s inclusive, more equitable and skilled for the future. 

These governments have an opportunity to build their national security and resilience by revitalising local industries and, by extension, local communities. It will be important to identify ‘national champions’—industries at the foundation of the nation’s economy. Money previously spent on foreign-aid contributions can be redirected to these industries. 

Large, centralised governments will have to be mindful, though, not to overwhelm small or nascent industries or communities with too much funding or regulation. These governments can take advantage of public–private–civil partnerships to understand how best to help these developing industries and communities thrive and grow. In areas of targeted investment, governments will want to monitor key indicators, such as industry growth and employment, to understand the impact of their investment. And upskilling will be vital to ensuring that local industries are staffed with people who have the know-how to help drive growth. 

For instance, Japan’s Government has expanded the stimulus programmes that it initiated for small enterprises at the beginning of the pandemic to include direct government financing for medium and large entities. The programme now involves government-backed lenders in Japan providing subordinated loans and preferred shares to all pandemic-impacted companies. Interest rates are about 1%, compared with the usual rate of 5% or more, and the loans don’t have to be coordinated with private lenders, as is usually required.

Decentralised and local governments maintain light central oversight, preferring that states and municipalities manage their affairs independently. Businesses have a wide berth to operate in a way that maximises profits, under the premise that those businesses that do well also create more jobs and put more money into local economies. If there’s a significant regulatory framework, it probably pertains to national safety and security, specifically protecting national supply chains and the economy from foreign interference. These governments rely on private, civil and local organisations as governance partners. A central question concerns how to enable industries and communities to support themselves. Doing so will generally involve removing obstacles to corporate and individual economic growth, for instance by reducing taxes, introducing protectionary tariffs, promoting tax incentives and risk guarantees to stimulate investment, and creating incentives for corporations and local governments to upskill their workforce. 

These governments have an opportunity to not only help local communities maximise their growth and fulfil their specific needs, but to also free up central government resources for redistribution to local institutions. This approach to governing can create thriving hyperlocal ecosystems, with cottage industries that can serve as the basis of the national economy. 

Such an economy, however, depends on a central government’s strong partnerships with, and trust among, the local governments, private sector and civil society organisations that serve as a bridge to the local economies that drive national GDP growth. These decentralised and local governments will also have to manage potential social and economic disparities among individual parts of the country. The central government can help manage these disparities by coordinating the sharing of knowledge and best practices among local partners and customising the stimulus and incentives they offer to different local governments. 

One example of a lean and local government’s approach to economic recovery can be seen in Mexico. The country’s tourism industry was significantly affected by COVID-19. Although the Government mandated reduced capacity and health and safety protocols across the industry, it didn’t implement protocols that would have made visitor entry difficult. It opted not to require international travellers to be tested for COVID-19 before entering the country, nor to quarantine or restrict their movement. 

Centralised and global governments foster alignment among local governments, the private sector and citizens in support of a singular set of national but globally influenced priorities and values. These governments identify, assist and incubate local industries that have a global competitive advantage, promote innovation in these industries and those aligned to a broader global agenda, and create regional supply chains to strengthen their national position and that of their neighbours. These nations’ regulatory framework is robust, aligns with international standards and norms, and balances economic and social progress. Key questions for these governments concern which industries support the global common good, how best to shape and affect the global agenda, and which partnerships—regional, local or international—are most beneficial. 

Investment in national champion industries might stimulate a significant amount of innovation. These governments have an opportunity to partner with the private sector on upskilling the citizenry, helping to create social-mobility opportunities that benefit society while providing those national champion industries with a workforce equipped to compete in a digital world. 

The primary challenge for these governments is ensuring that small and medium-sized enterprises, which make up a large percentage of many economies, don’t get left behind. It’s smaller companies that power most local economies and that are the foundation of a strong middle class. These large and global governments also need to have a strong, centralised communications strategy that explains how their global agenda is important to, and directly benefits, the citizenry; otherwise, they risk eroding the public’s trust in them. 

Norway has invested considerable resources in a government fund called the Green Platform Initiative . The initiative is run as a competition, with state-owned enterprises evaluating project proposals that focus on research, development and innovation in green growth, and granting awards from a pool of US$120m. The objective of the initiative is to spur investments in sustainable solutions, positioning the Norwegian economy for global growth. 

Decentralised and global governments  often consider global issues to also be national priorities, but they believe that unhindered markets are the most efficient and balanced way to make progress. These governments set the direction and tone of their globally aligned national policy but rely on the markets to carry it out. Lean and global countries have a consistent but broad regulatory framework in place and few protectionary policies; they rely on the free-market system to check and balance itself. They use interventionist policies sparingly, primarily to reduce obstacles for the business sector or to create a more competitive environment—for instance, by injecting liquidity into the financial sector, reducing taxes, providing tax incentives and risk guarantees, and creating a business-friendly environment to encourage foreign direct investment. One key question for these governments concerns how to identify and communicate a consistent set of national priorities, because lean governments generally don’t communicate through explicit programmes and incentives but instead apply a more subtle influence. Other key questions are how to balance a light-touch approach with helping industries build resilience and strengthening national security in a fracturing global environment, and how to determine what levers should be pulled, and when, to ensure that economic growth leads to a more equitable society. 

Lean and global governments, particularly those in larger, industrialised economies, can quickly create enormous growth, because their free-market economies are globally based and competitive. Industries and companies in these countries that weathered the pandemic might be poised for a windfall if they can lead in the market as global economies open up. 

The challenges for lean and global governments are both economic and social. Economies that grow too quickly are susceptible to overheating, leading to a spike in inflation, among other undesirable effects. Also, free-market economies driven by a global agenda without significant regulation, such as tariff protections, or support, such as targeted upskilling programmes, might result in the loss of small or nascent businesses and industries that can’t compete without these interventions. And the loss of these businesses and industries might diminish innovation and cause long-term damage to the country’s economy. Small and medium-sized enterprises that do survive might lose out in the marketplace if there is robust overseas competition, and income disparity could be exacerbated, as evidenced by the current  K-shaped recovery  emerging globally. 

Earlier this year, African nations illustrated how lean and global governments approach economic recovery, with their activation of the  African Continental Free Trade Area  agreement. The agreement removes trade barriers across the continent, reduces regulatory complexity, and paves the way for increased industrialisation at scale, jobs and global competitiveness.

Working together to create stronger, more inclusive economies

Governments and businesses are facing a world that has been radically changed by COVID-19, and recovery will probably be marked by significant instability and change. But there is opportunity, too, to recouple economic growth and social progress. Four guiding principles can help governments and businesses create a more efficient working relationship to achieve this vision. 

Build and communicate a national vision statement that includes roles, responsibilities and expectations for every stakeholder in society. The post-COVID world will give us an unprecedented opportunity to course correct and create stronger, better versions of our societies. Everyone has a role to play in this new vision; and businesses of all sizes should see themselves reflected in plans to rebuild the economic engine and help to create inclusive, skilled workforces and sustainable value and supply chains. 

Get buy-in from the private sector on social issues. Social issues—long the sole purview of governments—have become an issue for businesses, too, as stakeholders begin to demand that businesses use their resources and clout to effect positive social change. Governments and businesses must identify new ways to work together to drive this meaningful change.

Strengthen or build communications channels. To work together, governments and businesses must reassess, then build or strengthen channels that allow them to communicate with one another. Roundtables, liaison offices, and other solutions should be considered and widely implemented to ensure open, active dialogue. 

Improve mechanisms and incentives for transparency. Stakeholders are insisting that businesses take action on social issues and report transparently on those actions. As a result, businesses must re-evaluate their strategies and operating models. Governments can support businesses by providing economic incentives—in the form of increased capital support, tax breaks, preferential treatment on government bids and more—for companies that can demonstrate a sustained, good-faith effort to address social issues. 

For too long, governments and businesses have operated in silos, resulting in economies that are neither sustainable nor inclusive. Getting national economies growing again, in a way that is efficient and results in more equitable societies, will require that public- and private-sector leaders work together in a more coordinated, seamless manner. Governments can create societies that are stronger, more resilient and more equitable; businesses can propel this vision by providing jobs, competitive advantage and economic growth. Together, they can create economies that simultaneously drive growth and lead to more inclusive societies that benefit all.

PwC Italy Manager Roberta Maio also contributed to this article.

Ingrid Carlson

Global Strategy & Leadership, Director, PwC United States

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Analysis on the Economic Recovery in the Post-COVID-19 Era: Evidence From China

Dayang jiang.

1 School of Economics, Tianjin University of Commerce, Tianjin, China

2 Faculty of Geosciences and Environmental Engineering, Southwest Jiaotong University, Chengdu, China

Associated Data

The original contributions presented in the study are included in the article/supplementary material, further inquiries can be directed to the corresponding author.

As a major public health emergency, the COVID-19 pandemic has had a huge impact on economies all over the world. The experience of post-COVID-19 economic recovery is of great significance for achieving sustainable and high-quality economic development. Taking the economic development of China as an example, based on the theory of resilient economy and related measurement methods, this article selects five major indicators that are generally recognized as closely connected with economic resilience to construct a system of economic resilience indicators. In addition, the autoregressive integrated moving average (ARIMA) model is used to predict gross domestic product (GDP) under the scenario of no epidemic. The actual value of China's GDP is compared with the predicted value in the absence of the epidemic, verifying that strong economic resilience plays an important role in the country's economic response to major shocks. Based on the results, policy recommendations are made for countries to strengthen their economic resilience in the postepidemic era.

Introduction

The outbreak of COVID-19 in early 2020 and its rapid spread across the globe have caused huge shocks to the economies around the world. The Chinese government takes timely and effective measures. By the end of the first quarter of 2020, the outbreak of China has been effectively controlled and the national economy has entered the postepidemic recovery period. According to the data released by various sources, major economies in the world except China showed negative growth in 2020. Among them, the economic growth rate of the United States was −3.5%, that of Japan was −4.8%, that of Germany was −5.0%, that of France was −9.0%, and that of Britain was −10.0%. What can be drawn from the unique economic recovery experience of China?

As early as the 1970s, inspired by the research of Holling ( 1 ) on the rapid self-healing ability of ecosystems after encountering natural or manmade interference, referred to as “resilience,” scholars further applied this concept into many other fields, namely, ecology, engineering, and economics. The application of this notion in economics was marked by the research of Martin ( 2 ) on the problem of measuring recovery and resistance index, which further provides strong support for the research on assessing the sensitivity of various regions to shocks and their response. Subsequently, Baltagi ( 3 ), Brada ( 4 ), and Oliva ( 5 ) discussed the regional economic resilience after major economic impact events such as external shocks (2008 financial crisis) and natural disasters (Japan earthquake), respectively. The frequent occurrence of external events makes the implications of research on economic resilience more relevant.

In response to the outbreak of COVID-19, the Chinese government took various policies and programs to maintain economic activities and even to achieve economic growth. The technologically driven pandemic-control programs such as the use of facial recognition technology and big data to track population flow and population spatial distribution provide opportunities for further application of these cutting-edge new technologies into industries. The international cooperation initiatives of the Chinese government such as the provision of biomedical products and medical supplies to developing countries increase the visibility of Chinese products in these countries, which further promotes China's exports. In terms of macroeconomic management, the Chinese government adopted a domestic demand-led growth approach to the unprecedented disruption that the COVID-19 pandemic has brought to world trade. Meanwhile, the Chinese government provided its manufacturing sector with strong fiscal incentives in promoting Chinese manufacturers to adapt their production capacity to the emerging demands for pandemic-control supplies. For instance, textile manufacturing plants were encouraged to devote their production capacity to masks and protective clothing production.

As the most populous country in the world, China has the largest labor force. The labor-intensive manufacturing sector of China has been serving as an essential driver of the country's growth for more than 4 decades. The various measures such as smart lockdown, public health interventions, and amendment of new laws regulations that the Chinese government took during the COVID-19 pandemic help control the spread of the COVID-19 and maintain the labor force of the country in good health condition. The stringency measures by the government (lockdown and COVID-19 testing requirement) might cause a sharp decline in economic activities in the short run. However, in the long run, stringency measures turn out to better help a country's economy recover from the shock of the pandemic. Meanwhile, the super large domestic market scale of China can be a great advantage for the country to promote the commercial use of the technological improvements (such as intelligent manufacturing) that have been achieved during the pandemic. Therefore, starting from the third quarter of 2021, the economy of China has experienced a rapid recovery.

According to the economic recovery of various countries in the post-COVID-19 period, this article aims to discuss the economic recovery of China by constructing a resilience index. The analysis results of the autoregressive integrated moving average model (ARIMA model) show that the economy of China has strong economic resilience. The article is organized as follows. The second section clarifies the definition of economic resilience and the mechanism of economic resilience under the impact of COVID-19 and makes the comparative analysis of various measurement methods of the economic resilience index. In the third section, the index measurement system for economic resilience is constructed, and the index is calculated and analyzed. The fourth section describes the setting of the ARIMA model, and this model uses an econometric model to make an empirical analysis of China's gross domestic product (GDP) data from 1990 to 2020. Finally, the fifth section makes predictions on the development trend of China's economy from the perspective of economic resilience.

Economic Resilience Measurement

Economic resilience is the recovery ability of the economy aftershocks, which is developed based on ecological resilience. Edward ( 6 ) defines the resilience of the economic field as the ability of the regional economy to maintain or restore to a pre-existing state (usually assumed to be a balanced state) in the presence of certain types of exogenous (i.e., externally generated) shocks. Economic resilience is often dynamic. The speed at which an economy or system recovers from severe damage to an ideal state is an important indicator of the strength of economic resilience. Therefore, this article mainly analyzes the resilience of China's economy from the perspective of economic recovery after the COVID-19 outbreak.

First, the path of economic development after the epidemic is sorted out in the light of Figure 1 to deepen understanding of economic resilience. The vertical axis represents the macroeconomic development level, which is a function changing with time. The lower the value is, the lower the economic development level is.

Economic development after the epidemic.

Assuming that the COVID-19 outbreak occurs at time T 0 , and the economic system operates at a normal level before T 0 . When the outbreak occurs, the level of economic development will be damaged to a certain extent. Then, with time, the economic system functions of the areas affected by the epidemic will continue to be repaired, and the economic recovery will be gradually realized at time T 1 or T 2 . Moreover, from time T 0 to time T 1 or T 2 , the speed and degree of economic recovery are always in dynamic change. It is worth noting that Figure 1 only broadly divides the economic recovery from T 1 to T 2 , focusing on showing the role of economic resilience in the process of economic recovery. In reality, there must be fluctuations between T 1 and T 2 .

So far, scholars did not reach a consensus over the definition of economic resilience, especially for the resistance index and resilience index. However, following the original definition of ecological resilience ( 6 ), this article defines economic resistance as the ability of the economy to resist shocks. Resilience refers to the postshock resilience of an economy. As this article studies economic development after the epidemic, the measurement of resilience is more relevant from the perspective of economic recovery. Meanwhile, there are different measurement methods for economic resilience. For example, Briguglio et al. ( 7 ) adopted a multi-indicator comprehensive measure, which mainly measured economic resilience by constructing a measurement system covering macroeconomic stability, micromarket efficiency, economic governance, and social development. Martin ( 2 ) and Faggian et al. ( 8 ) used a single indicator (such as the unemployment rate) to measure the economic resilience after the impact of a crisis event.

This article fully absorbs the advantages of the two measurement methods. On the one hand, it draws on the comprehensive advantages of multi-index measurement, and selects five major indicators from the consumption, investment, import and export, government expenditure, and employment levels that are most closely related to the macroeconomy to establish an indicator evaluation system, and processes the data through entropy method.

First, the raw data are standardized,

With: X i j * represents the standardized value of the j th index in the i quarter; X ij represents the original index value of the j th index in the i quarter; max( X j ) represents the maximum value of the j th indicator; min( X j ) represents the minimum value of the j th indicator; i ( i = 1, 2, 3, and 4) as the quarter; j ( j = 1, 2, 3, 4, and 5) as a specific index.

Then, weights are given to each index. If the entropy value of the j th indicator is e j , then the information entropy redundancy of this indicator is d j = 1 − e j , and the weight of each indicator is as follows: a j = 1 - e j ∑ j = 1 5 d j

Based on the above formula, the comprehensive evaluation value of each indicator is calculated as follows: E i = ∑ j = 1 5 a j × X i j * .

On the other hand, the advantages of single index measure to fully consider the economic development in the crisis period and postcrisis period are learned, and the comprehensive indicators obtained by entropy method are analyzed and processed, to more accurately and specifically reflect the economic development in the post-COVID-19 era.

Therefore, this article will measure the economic resilience index according to the following formula:

t as for a quarter in 2020 and beyond; t-n , ( n = 1,2) as for the corresponding quarter in 2019 and beyond; E i represents the comprehensive evaluation value of the macroeconomy treated by the entropy method. β is the resilience index, the size of which represents the strength of economic resilience. The greater the restoring force index the larger the resilience index, the stronger economic resilience, and vice versa.

Measuring Economic Resilience

According to the public data and statistical bulletins of the National Bureau of Statistics of China, the Ministry of Human Resources and Social Security, and the Ministry of Finance, the five major economic indicators from the first quarter of 2019 to the first quarter of 2021 were selected, namely, the number of new jobs in cities and towns, the national social total retail sales of consumer goods, import and export value, investment in fixed assets (excluding farmers), and the general public spending. An index evaluation system reflecting macroeconomic resilience is constructed, and the entropy method is used to comprehensively process the data. The weight assignment results and the influence direction of each index on macroeconomic are shown in Table 1 .

2019 Q1–2020 Q1 economic data tables.

Sign “+” represents positive influence; “-” indicates negative influence .

In the postepidemic era, economic recovery is the primary task of the macroeconomy. Due to the significant seasonal differences in the data indicators, the economic resilience after the epidemic is measured quarterly. The calculation results are shown in Table 2 .

Measurement results of economic resilience from the first quarter of 2020 to the first quarter of 2021.

Figure 2 shows the line chart of China's macroeconomic Resilience Index. In addition, to ensure the effectiveness of the evaluation system constructed, we have conducted a robustness check. We use disposable national income per capita to replace the sales of consumer goods in China and add some additional relevant economic variables (such as the GDP index variable and the number of industrial enterprises). This robustness check shows that the trend of the resilience index has not changed, which fully shows that the results obtained by using the variables selected are reliable.

Line chart of China's macroeconomic resilience index from the first quarter of 2020 to the first quarter of 2021.

As a whole, the Chinese economy is greatly affected by the epidemic in the first half of 2020, and the resilience index is less than zero. However, the impact of the epidemic on the economy was short-lived. The resilience index began to reverse in the third quarter, showing a trend of substantial growth above zero. Economic resilience has effectively alleviated external shocks, and economic development has improved significantly.

Specific analysis shows that the first quarter of 2020 is the most severe period of the COVID-19 in China. A number of “rigid” epidemic prevention and control measures, such as city lockdown, regional isolation, and import and export restrictions, have damaged the overall environment for economic operation. In particular, the manufacturing and service industries have been severely affected by the epidemic, and the impetus for economic growth has been severely reduced. At this stage, the impact of the epidemic on economic development far exceeds the limit of economic resilience, and the economy as a whole is in the stage of “weak” recovery, and the resilience index is bound to be the lowest in the whole year. The resilience index in the second quarter was −0.198. Although it was still negative, it was significantly higher than the −0.986 resilience index in the first quarter. This is due to the effective control of the epidemic caused by several epidemic prevention and control measures taken in the early period. The improvement of the local epidemic has eased the external pressure on economic recovery and created a stable external environment for the resumption of work and production and the implementation of economic recovery policies. At the same time, due to the rapid rise in emergency demand for medical protection materials and living supplies caused by the epidemic, the production capacity and creativity of the secondary and tertiary industries have been fully stimulated, and many new industries and new formats have been born and promoted, which has injected new vitality into the economic recovery after the epidemic. In the second half of 2020, COVID-19 has basically calmed down in China, and economic and industrial policies that have hedged the impact of the epidemic have been implemented. The Chinese economy has entered a new stage of restoration, the resilience index has been increasing, and the resilience of the national economy has become more evident. In addition, the complex industrial chain formed with the epidemic as the core has been continuously extended and optimized, which has opened up a new path for economic recovery. Since the third quarter, the economy of China has entered a period of rapid recovery, and the economic development trend has been improving.

ARIMA Model

Specification of the model.

Autoregressive integrated moving average (ARIMA) was first proposed by Box and Jenkins (1970). The basic idea of the model is to take the sequence formed by the change of the predictor variable over time as a random sequence, and then use a specific mathematical model to describe the random sequence based on the autocorrelation of the time sequence. In this article, the sequence of China's GDP data from 1990 to 2020 is taken as a random sequence, and the predicted GDP value is generated by the ARIMA model, and the effectiveness of the model is judged by the relative error between the predicted GDP value and the real GDP value, and the relative error of 2020 is compared with other years to explain the macroeconomic development of China under the epidemic situation. ARIMA (p, d, q) is a combination of autoregressive model, moving average model, and difference method, that is, the ARMA model after the difference of nonstationary series. This article constructs the ARIMA model as follows:

p is the order of the autoregressive model;

q is the order of the moving average model;

ϕ i ( i = 1, 2, …, p ) θ j ( j = 1, 2, …, q ) is the undetermined coefficient of the model; and

ε t is the residual; y t is the predicted value.

GDP Prediction Using ARIMA

The data selected in this article are Chinese GDP data from 1990 to 2020. To ensure the accuracy and authenticity of the data, all the selected data are from the National Bureau of Statistics of China. As can be seen from Figure 3 , the time-series data of GDP are nonstationary, which needs further processing. Therefore, the data are processed logarithmically, but it is found that the data are still obviously nonstationary, and then the data are subjected to a second difference, and the obtained data have no obvious trend. The augmented Dickey–Fuller (ADF) test is performed on the processed data, as shown in Table 3 . The t-statistic is −4.946446, which is far less than the critical value of 5% and 1% significance level, and the p value is 0, indicating that the data have stabilized.

Time series chart of GDP data from 1990 to 2020.

ADF unit root test in second-order difference.

The autocorrelation and partial autocorrelation diagrams of the processed GDP data are shown in Figure 4 . The partial autocorrelation coefficients of the data are obviously truncated, so try ARIMA (1, 1, 1), ARIMA (0, 1, 1), and ARIMA (0, 1, 2) and other models. By comparing each model, it is found that only the parameter estimates of the explanatory variables of the ARIMA (0, 1, 1) model are significant at the 5% significance level, and the Akaike information criterion (AIC) and Bayesian Information Criterion (SBC) of the model are smaller than other models. The fitting results of the model are shown in Table 4 .

Autocorrelation and partial autocorrelation graph.

ARIMA (0, 1, 1) model fitting results.

It can be seen from Figure 5 that the predicted value obtained in the ARIMA (0, 1, 1) model is very close to the real value, and the fitting effect is better. To further test the model fitting quality, this article calculates the relative error between the real GDP value and the predicted GDP value from 1992 to 2020. It is found that the relative error of only 3 years is >5%, and the relative error of the other years is within 5%, with an average of 3.13%. The small error fully demonstrates the high accuracy of the model prediction. It is worth noting that the impact of COVID-19 on the economy is more severe than any major natural disaster or financial crisis in the past, but the relative error between the actual value of Chinese GDP in 2020 and the predicted value under the condition of no epidemic intervention is only 3.14%, and the level is equal to the average level, which fully demonstrates the strong economic resilience of China.

Fitting graph of Chinese GDP forecast value and actual value from 1990 to 2020.

Conclusions

It is a consensus that COVID-19 has an impact on the economy of all countries. This article mainly analyzes Chinese economic recovery after the outbreak of the epidemic. First of all, by measuring the economic resilience from the first quarter of 2020 to the first quarter of 2021, we find that the economic resilience index only shows a negative value in the first two quarters of 2020, while the resilience index shows a relatively strong growth momentum in the third and fourth quarters, which fully highlights the strong economic resilience of China. Therefore, the Chinese economy can achieve recovery and growth in a relatively short period. Second, the ARIMA model is used to forecast GDP, and we find that the actual value of Chinese GDP in 2020 is not much different from the predicted value (in the absence of the epidemic), which further confirms the above judgment. To sum up, we can conclude that COVID-19 did have an impact on the economy of China, but strong economic resilience has prompted the rapid recovery of the Chinese economy after the epidemic, with a higher degree of recovery.

Finally, learning from the postepidemic recovery of China, there is no doubt that strengthening economic resilience is an effective way to cope with and mitigate such external shocks, and favorable support for the economic recovery of all countries. On one hand, COVID-19 and natural disasters are external shocks, which affect the operating environment of the economy and cause damage to economic development. The establishment of a more complete risk emergency mechanism and social governance system can ensure the stability of the economic operating environment and promote economic resilience, and thus create conditions for economic recovery. On the other hand, scientific and sound macroeconomic policies are an important aspect of enhancing economic resilience. The government should enhance the ability of dynamic adjustment, fully mobilize the enthusiasm and vitality of supply and demand sides through policy guidance, and improve the ability of each economy to cope with risks.

Data Availability Statement

Author contributions.

DJ: conceptualization, methodology, formal analysis, writing—original draft preparation, and funding acquisition. XW: formal analysis and writing—original draft preparation. RZ: conceptualization, methodology, and project management. All authors have read and agreed to the published version of the manuscript.

This authors acknowledge financial support from Social Science Fund of Municipal Education Commission of Tianjin, China (Grant#: 2019JWZD56).

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher's Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

The Global Economy: on Track for Strong but Uneven Growth as COVID-19 Still Weighs

A year and a half since the onset of the COVID-19 pandemic, the global economy is poised to stage its most robust post-recession recovery in 80 years in 2021. But the rebound is expected to be uneven across countries, as major economies look set to register strong growth even as many developing economies lag.

Global growth is expected to accelerate to 5.6% this year, largely on the strength in major economies such as the United States and China. And while growth for almost every region of the world has been revised upward for 2021, many continue to grapple with COVID-19 and what is likely to be its long shadow. Despite this year’s pickup, the level of global GDP in 2021 is expected to be 3.2% below pre-pandemic projections, and per capita GDP among many emerging market and developing economies is anticipated to remain below pre-COVID-19 peaks for an extended period. As the pandemic continues to flare, it will shape the path of global economic activity.

The United States and China are each expected to contribute about one quarter of global growth in 2021. The U.S. economy has been bolstered by massive fiscal support, vaccination is expected to become widespread by mid-2021, and growth is expected to reach 6.8% this year, the fastest pace since 1984. China’s economy – which did not contract last year – is expected to grow a solid 8.5% and moderate as the country’s focus shifts to reducing financial stability risks.

Lasting Legacies

Growth among emerging market and developing economies is expected to accelerate to 6% this year, helped by increased external demand and higher commodity prices. However, the recovery of many countries is constrained by resurgences of COVID-19, uneven vaccination, and a partial withdrawal of government economic support measures. Excluding China, growth is anticipated to unfold at a more modest 4.4% pace. In the longer term, the outlook for emerging market and developing economies will likely be dampened by the lasting legacies of the pandemic – erosion of skills from lost work and schooling; a sharp drop in investment; higher debt burdens; and greater financial vulnerabilities. Growth among this group of economies is forecast to moderate to 4.7% in 2022 as governments gradually withdraw policy support.

Among low-income economies, where vaccination has lagged, growth has been revised lower to 2.9%. Setting aside the contraction last year, this would be the slowest pace of expansion in two decades. The group’s output level in 2022 is projected to be 4.9% lower than pre-pandemic projections. Fragile and conflict-affected low-income economies have been the hardest hit by the pandemic, and per capita income gains have been set back by at least a decade.  

Regionally, the recovery is expected to be strongest in East Asia and the Pacific, largely due to the strength of China’s recovery. In South Asia, recovery has been hampered by serious renewed outbreaks of the virus in India and Nepal. The Middle East and North Africa and Latin America and the Caribbean are expected to post growth too shallow to offset the contraction of 2020. Sub-Saharan Africa’s recovery, while helped by spillovers from the global recovery, is expected to remain fragile given the slow pace of vaccination and delays to major investments in infrastructure and the extractives sector.  

Uncertain Outlook

The June forecast assumes that advanced economies will achieve widespread vaccination of their populations and effectively contain the pandemic by the end of the year. Major emerging market and developing economies are anticipated to substantially reduce new cases. However, the outlook is subject to considerable uncertainty. A more persistent pandemic, a wave of corporate bankruptcies, financial stress, or even social unrest could derail the recovery. At the same time, more rapid success in stamping out COVID-19 and greater spillovers from advanced economy growth could generate more vigorous global growth.

Even so, the pandemic is expected to have caused serious setbacks to development gains. Although per capita income growth is projected to be 4.9% among emerging market and developing economies this year, it is forecast to be essentially flat in low-income countries. Per capita income lost in 2020 will not be fully recouped by 2022 in about two-thirds of emerging market and developing economies, including three-quarters of fragile and conflict-affected low-income countries. By the end of this year, about 100 million people are expected to have fallen back into extreme poverty. These adverse impacts have been felt hardest by the most vulnerable groups – women, children, and unskilled and informal workers.

Global inflation, which has increased along with the economic recovery, is anticipated to continue to rise over the rest of the year; however, it is expected to remain within the target range for most countries. In those emerging market and developing economies in which inflation rises above target, this trend may not warrant a monetary policy response provided it is temporary and inflation expectations remain well-anchored.

Climbing Food Costs

Rising food prices and accelerating aggregate inflation may compound rising food insecurity in low-income countries. Policymakers should ensure that rising inflation rates do not lead to a de-anchoring of inflation expectations and resist using subsidies or price controls to reduce the burden of rising food prices, as these risk adding to high debt and creating further upward pressure on global agricultural prices.

A recovery in global trade after the recession last year offers an opportunity for emerging market and developing economies to bolster economic growth. Trade costs are on average one-half higher among emerging market and developing economies than advanced economies and lowering them could boost trade and stimulate investment and growth.

With relief from the pandemic tantalizingly close in many places but far from reach in others, policy actions will be critical. Securing equitable vaccine distribution will be essential to ending the pandemic. Far-reaching debt relief will be important to many low-income countries. Policymakers will need to nurture the economic recovery with fiscal and monetary measures while keeping a close eye on safeguarding financial stability. Policies should take the long view, reinvigorating human capital, expanding access to digital connectivity, and investing in green infrastructure to bolster growth along a green, resilient, and inclusive path.  

It will take global coordination to end the pandemic through widespread vaccination and careful macroeconomic stewardship to avoid crises until we get there.  

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The economy of tomorrow: recovering and restructuring after covid-19.

October 28, 2020

By Joseph Stiglitz

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Nearly nine months into the COVID-19 pandemic and accompanying recession, one thing is clear: The US economy will not have a V-shaped recovery. Despite the CARES Act, upper-income Americans continue to experience an entirely different economy than lower-income Americans. Misplaced concern over the deficit and poorly designed, broad-based policy interventions are largely to blame.

While the root cause and scale of the COVID-19 recession make it different from any the US has faced in recent memory, we can apply lessons learned from past economic crises to design effective policy for this one. Once triggered, downturns follow a familiar pattern, whereby businesses see sales shrink, firms reduce investment and lay off workers, and families limit consumption. The COVID-19 recession brings the added complications of both decreased demand for and supply of some once-routine activities, heightened uncertainty about the severity and duration of the pandemic, and acute health and economic disparities for low-wage workers—disproportionately people of color.

In The Economy of Tomorrow: Recovering and Restructuring after COVID-19 , Roosevelt Chief Economist Joseph Stiglitz outlines what we know about the US economy from past crises, explains how we can apply those lessons to the ongoing COVID-19 recession, and offers policy recommendations to enable a robust and equitable recovery, including:

• Prioritizing resources to end the pandemic;
• Providing liquidity assistance to the businesses and individuals at greatest need;
• Shoring up funding to state and local governments; and
• Guaranteeing unemployment benefits to workers for as long as is necessary.

Tags: Democratic Governance , Economic Security , Industrial Policy and Trade

Joseph Stiglitz

As chief economist and senior fellow at the Roosevelt Institute, Joseph Stiglitz focuses on income distribution, risk, corporate governance, public policy, macroeconomics, and globalization.

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What will it take to restore the economy after COVID-19?

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Unemployment in the United States is between 13 and 14 percent—the highest rates we’ve seen since the 1930s. The stock market swings up and down in part based on how optimistic global investors are that the worst of the COVID-19 pandemic is behind us.

Narayana Kocherlakota , the Lionel W. McKenzie Professor of Economics at the University of Rochester and a former president of the Federal Reserve Bank of Minneapolis, drives home a simple point about the prospects for economic recovery: it will depend on how effectively we can combat COVID-19.

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“If people are worried about the disease, they’re less likely to get a haircut or go to a restaurant. So the disease operates as a drag on the economy,” he says. “The better we do on public health, the better the economy will do.”

What’s the best-case scenario for recovery?

The best-case scenario is one where, for whatever reason, the virus ceases to be a major factor in our lives by the second half of the year. That can happen in a number of different ways. The virus can mutate, researchers can come up with a treatment that can be delivered quickly, or—because of our public health interventions through testing, tracing, and quarantining (TTQ)—we’re able to get on top of COVID-19 to the extent that people feel confident that there aren’t that many cases any more. If any of that happened, then we can expect a very fast recovery in the second half of the year.

In lieu of an effective national TTQ program, what would you expect in terms of an economic recovery?

The Federal Reserve expects that unemployment will drop to a little below 10 percent by the end of this year, and not reach the five percent range until the end of 2022. Growth would be slow, while unemployment remains high. That’s what I would call the modal—or most likely—outlook, given that we have a patchwork of approaches around the country—and around the world—to COVID-19.

Is there a third outlook?

The worst case is much worse. In the state of New York, we’ve seen a tremendous decline in cases, which comes from serious restrictions on people’s behavior and actions. We’re hoping that the TTQ program will be sufficiently robust so that we won’t have to go back to those restrictions.

In the worst-case scenario, governments are unable to get on top of the disease, resulting in wave after wave of new cases. Then we’d be stuck at near 10 percent unemployment for a very long time.

How important are stimulus plans if the recession lingers?

If the virus remains a threat, then stimulus will be critical. If people are not working, we need the government to provide money for them to continue making purchases. Without those stimulus payments, demand will falter and unemployment will stay high.

Right now, the political dialogue is moving against more fiscal interventions. We had robust interventions by the federal government in March and April, most of which were designed to expire over the course of the summer. Given the political dialogue and my assessment of national public health policy, I really worry about what the economy will look like in the fall.

Four ways to rescue the economy from the pandemic

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In many western countries, COVID-19 infection rates are rising again. For some like the UK, France and Spain, it appears that the second wave of the pandemic is already here. The science also tells us that we may see a further upsurge in 2021. We do not know how effective early vaccines will be, and the rollout of vaccination programmes will be gradual.

A major issue for governments is the extent to which they have the fiscal firepower to protect jobs and economic activity. In the UK, the government’s spring and summer measures to protect businesses and jobs were expected to add £192 billion to the budget deficit, increasing the debt-to-GDP ratio from 85.4% in 2019 to 106.4% by March 2021.

These are the highest levels of debt since the early 1960s, and record budget deficit levels for peacetime. And yet the second wave of COVID-19 is going to strain the fiscal response much further. Chancellor Rishi Sunak’s newly revamped job support scheme and other measures to help businesses suffering under the latest restrictions will cost further billions.

To get a possible sense of where this might be heading, the Institute for Fiscal Studies in June modelled for a scenario in which there was a second wave of COVID-19 in the fourth quarter of 2020 and targeted regional lockdowns in the first half of 2021. It predicted that this would produce a budget deficit of over 20% of GDP this year – equivalent to second world war levels – and a debt-to-GDP ratio of nearly 120% by 2024-25.

If this is the kind of situation that many countries are now facing, what options are open to governments, and what key indicators should they focus on?

1. Growth first, sound money second

Governments must prioritise resuming economic growth from 2021 onwards. Put simply, this will require them to go easy on raising taxes or cutting spending quickly to stabilise the debt-to-GDP level. The fiscal correction which would be required to stabilise public finances will be less if a faster recovery can be engineered.

Governments must focus on public investments, particularly those aimed at boosting research and development spending and productivity growth. Many observers have recommended that governments put money into greening the economy. Not only will this stimulate growth in sectors for the future, it will also help address the climate crisis.

2. Build confidence

There needs to be a clear strategy to restore economic confidence, which is inextricably linked to people’s confidence in how the pandemic and its economic fallout is being managed. Even before the second wave took hold, it was clear that the economic recovery was slowing during the summer in many advanced economies.

The OECD reported in September that Google data on people’s shopping and recreational activity (as a proxy for what they are consuming from social businesses) had not returned to pre-pandemic levels. Order books in most advanced economies (except China) did not fully recover either.

It’s clear that consumer and business confidence cannot fully bounce back until uncertainty on the duration of the pandemic begins to subside. This is one reason why a number of economists have urged countries like the UK, where the economic hit has been worse , to focus on protecting employment. The furlough scheme in the UK should probably have been extended into this second wave, and the chancellor’s latest expansion of the job support scheme looks like a partial U-turn .

3. Test and trace still vital

Linked to this need to reduce uncertainty, there is no trade-off between health and the economy. Countries which have done better at keeping infection rates low have also done well at reducing the economic slump.

Some of that success with infections may have been good fortune, or early action in closing travel down quickly in early 2020. But countries such as Finland and Germany also had a strong capacity for testing and tracing and very quickly built it up further. Even at this stage, countries like the UK need to look at whether test and trace can be quickly improved, even at the cost of increased investment.

4. More targeted support

As the recovery begins to strengthen during 2021, a key conundrum for policymakers will be whether to prioritise stimulating aggregate demand in the economy, such as using tax cuts, or more targeted support measures for particular sectors or parts of the workforce.

It has recently been said that the recovery after a second wave might be more W-shaped as a whole, but K-shaped for individual sectors. In other words, while sectors like online retail and technology/software are booming, others like conventional retail, travel and hospitality will take a long time to recover.

Business support may need to switch to a more sectoral approach. The UK has done a little here with the “ eat out to help out ” scheme and now small monthly grants for firms in sectors like hospitality and leisure.

Similarly, governments will have to focus their support on those in the labour market for whom the “scarring effects” of unemployment will be most serious. For instance, the crisis will particularly affect the job prospects of young people whose transition from education to work is being disrupted. At the recovery stage, support will therefore need to be switched to job creation – for example, by lowering employer national insurance contributions for employers creating new jobs.

We are entering a pivotal period in our fight against COVID-19. While there is no denying the challenges ahead, we are also better prepared and more knowledgeable than in March. Policymakers must use this to their advantage and craft an economic response which is comprehensive and nimble in equal measure.

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Why the post-COVID-19 economic recovery can’t be about ‘growth at all costs’

Recovery from the COVID-19 pandemic offers an opportunity for companies to accelerate progress to grow, broaden, and sustain prosperity for more Americans. In this inaugural episode of McKinsey’s new Future of America podcast, McKinsey’s Kweilin Ellingrud and Greg Kelly discuss how leading companies can use growth to drive sustainability and promote genuine inclusion. An edited version of the conversation follows. For more conversations on the Future of America, subscribe to the podcast .

Kweilin Ellingrud: Welcome to the first episode of McKinsey’s new Future of America podcast, where we’ll explore how we can build a future that drives sustainable and inclusive growth. This isn’t about trade-offs. We reject the “or” and embrace the “and.” Join us in conversations with leaders who are accelerating progress to grow, to broaden, and to sustain prosperity for more Americans.

I’m Kweilin Ellingrud, your host for today. I’m a McKinsey Global Institute director and a senior partner based in Minneapolis. I lead the development of insights on the future of work, gender equality, racial equity, and productivity. I will be cohosting this show with my colleague Andre Dua. He is a senior partner at McKinsey and managing partner of our Miami office. Andre works on issues related to education, reskilling and upskilling, economic opportunity and the distribution of that opportunity, and the US economic outlook. You’ll be hearing from him in future episodes.

Today I’m joined by Greg Kelly, my senior-partner colleague in the Atlanta office and the global leader of our growth, marketing, and sales practice. Greg helps companies grow in a way that transcends the bottom line and improves communities and the environment. Greg, welcome, and thank you for being with us.

Greg Kelly: It’s a pleasure to be with you on this first recording.

Kweilin Ellingrud: Greg, can you tell our listeners a bit about your background?

Greg Kelly: Sure, Kweilin. I’ve been at the firm for 27 years, 27 of the 30 years of my professional life, during which I have focused on working to help consumer companies grow better and faster. Our research shows that you’re more likely to grow better and faster if you pursue growth in multiple dimensions. Growth in your core, growth in adjacencies, growth in geographies, and to do so with multiple levers. That’s what I’ve been focused on: helping some of the best companies and brands in America grow better and faster.

Kweilin Ellingrud: Greg, you’ve spent your career helping companies not just grow but also grow in sustainable ways that benefit all stakeholders. Here at McKinsey, we’re unapologetic about being advocates for that growth. Not just the growth but also the sustainability and the inclusion elements of it. These aren’t trade-offs. They are mutually reinforcing elements of growth. And you can’t have sustainability and inclusion without growth as the foundation.

Greg Kelly: I firmly believe that. I think it’s never been more true than it is today, with the increased transparency. Customers and consumers know more about how a company treats its employees than ever before. They know more about how companies work in their communities than ever before. And they want to be associated with companies that are really making a positive difference. So I find that companies with a relatable purpose that’s authentic with their heritage are the ones that are winning with customers and consumers.

Kweilin Ellingrud: Let’s talk about economic recovery, and economic recovery from the pandemic. What has it looked like so far? What does it look like as we look ahead?

Greg Kelly: It’s been fascinating for me, as a student of customer behavior, to see how the pandemic has changed behaviors. It’s really interesting when you see the impact because it’s really hard to change behaviors. I’ll give you a small example. Retailers occasionally have to remodel. Restaurants will have to remodel and update their facilities. But they hate doing it. They have loyal customers, and upending those routines gives their customers a reason to change. And sometimes it’s hard to get them back. So they really hate to do it. And normally, there aren’t that many big changes that consumers make. So changing behaviors takes years and years to do.

The pandemic changed that overnight. What we saw with the pandemic is that 75 percent of consumers took on new digital routines. E-commerce penetration, which was 16 percent in 2019, rose to 35 percent in 2020. From a B2B perspective, eight in ten buyers said their omnichannel behaviors were just as good, if not better, than the way they had interacted before. As a result, we’re seeing companies be much more aggressive with connecting with their consumers and customers in more personalized, digitally enabled ways than before.

Kweilin Ellingrud: What a dramatic change on all dimensions, as you described.

Greg Kelly: Another big change that we’ve heard a lot about is the supply chain change—the supply chain disruption—which, of course, has been a big catalyst for the highest inflation we’ve had in 40 years. And that’s really required companies to be on top of their game—both on the demand side and the supply side.

On the demand side, that’s thinking about how to put the customer at the center and add value, and then make sure that they get compensated for that value with the pricing and promotion that’s commensurate with the cost increases that they’re incurring. And then on the supply side, that’s giving a new level of thought to where their products are produced, how much inventory they’re building, and how they’re doing their forecasting, which has to be much more sophisticated than in the past.

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Unpacking what sustainable and inclusive growth looks like.

Kweilin Ellingrud: Let’s take each of the elements of sustainable and inclusive growth separately. Let’s start with growth because without the growth, the rest is not quite as interesting. Where have you seen CEOs and companies driving really transformative growth?

Greg Kelly: It starts with the growth mindset. As you said, if you don’t have growth, it’s hard to do as much as you can and need to do on the sustainability and inclusivity side, as it helps fund some of the improvements you need in sustainability. And it creates opportunities for people from an inclusion standpoint. What I found in working with companies is that it really does start with a growth mindset. I can usually tell in my first conversation with the top leaders of a company whether or not they’re going to be a growth outperformer. When I’m talking to those top growers, the question isn’t really, “Can we?” It’s more a question of, “Where and how should we grow? Where are the greatest opportunities?” And they’re usually more focused on a wider variety of growth levers.

As I mentioned in the introduction, thinking through how much we can grow in the core is important. And by the way, the outperformers always grow in the core too. We usually find that you’re much more likely to outperform if you’re growing in your core categories, in your core market, because you’re always finding renewal opportunities. But then you’re moving to adjacencies and growing in adjacencies and finding opportunities for those strengths to apply in new ways. And then you’re also growing in additional geographies and doing that with a wider variety of capabilities with innovation and a focus on your core categories, your core customers, and then you’re finding even better ways to meet your customer needs. Frequently, that requires better innovation. Also, it can be connecting more digitally, connecting with better marketing. We talk about full-funnel marketing, which is the brand-building marketing as well as the performance marketing. So connecting with better capabilities and then also pursuing growth inorganically through mergers and acquisitions. We find that the growth outperformers use those multiple levers to drive growth. But again, it all starts with that growth mindset. The leaders with that growth mindset grow twice as high as those without it.

It starts with the growth mindset. If you don’t have growth, it’s hard to do as much as you can and need to do on the sustainability and inclusivity side, as it helps fund some of the improvements you need. Greg Kelly

Kweilin Ellingrud: What about in terms of inclusion? We’ve seen the business case for diverse companies and diverse leadership pretty consistently. But what are some of the leading practices of CEOs, of company leaders to promote genuine inclusion, both for employees and their customers?

Greg Kelly: It starts with awareness. They have to know where they stand and where they stand at each different level. You’re well aware, I know, of the different assessments that we have for women in the workplace. Customers understanding that at the entry level, at the manager level, at the more senior levels in the boardroom, is really a critically important starting point.

The second part is [the company’s] commitment to change—really setting aggressive aspirations for what they can and should do. A third is then rewarding that change. We’re seeing leading companies really build that into their performance assessments for their key leaders.

And finally, there’s real coaching and development on the “How?” I know I’ve learned a lot over the past few years. I have a transgender son, for example. I thought I knew a good bit about inclusion, but I found out there was much more that I needed to learn to be a truly inclusive father. I think the same thing is true for our leaders at our companies. We all have a lot we can learn.

Kweilin Ellingrud: So that’s growth, inclusion. Finally, let’s talk about sustainability. What have you seen in terms of how companies have successfully pursued business goals while also prioritizing outcomes for the environment?

Greg Kelly: Kweilin, I’ve found the same four things that I just mentioned on inclusion apply to sustainability as well. Having real awareness, committing to change, rewarding the change, providing coaching and development to make the change happen. Maybe one of the key differences, I’d say, when it comes to sustainability, is just how far you have to reach.

For many of our companies, sustainability and being more sustainable means reaching outside their own companies and helping their suppliers improve their sustainability. So it’s even more externally oriented. One retailer with whom we worked is a good example where, in their own operations, they worked on [being more sustainable] and got to a good spot pretty quickly. But the real emissions are coming from all of their suppliers. They were pretty creative in creating a solution for all of their suppliers to understand their own emissions, understand what levers they might pursue to reduce those emissions, and then also expecting progress for those suppliers over time.

Confronting a challenging landscape

Kweilin Ellingrud: Greg, I’d love to explore what the future of America looks like for the average consumer out there. You’ve got decades of experience with consumer and retail companies, and we’ve seen that it’s a uniquely challenging time for a lot of Americans. Our latest American Opportunity Survey published just a couple of months ago found that only 35 percent of respondents thought it likely that our country as a whole will enjoy continuous growth and economic opportunity over the next five years. So the outlook is quite pessimistic. What actions do you think that consumer-facing companies can take in this more challenging landscape to drive sustainable and inclusive growth?

Greg Kelly: That’s a great question, Kweilin, and I think it goes back to what we’ve been talking about: first of all, having that mindset for growth, and that mindset that growth is a positive driver for sustainability and for inclusion. So [companies can start] with that mindset and aspiration to have the “and” and drive sustainable inclusive growth.

The second [action] is being pretty aggressive in the pursuit of that. And by aggressive, I mean pursuing multiple avenues. We find that the companies that look to grow in their core, in adjacencies, in additional geographies are the ones that are more likely to succeed. And we also find that those that are thoughtful about doing that through multiple capabilities are more likely to succeed.

Whether that’s improving their innovation capability, their digital connections, or what we call full-funnel marketing, which is both brand-building and performance-oriented marketing, and those that are thoughtful about how acquisitions can help accelerate their progress—those are the [companies] that outperform. So that second key is pursuing multiple levers. And third, holding themselves accountable for the “and,” for driving inclusion and sustainability and growth.

Kweilin Ellingrud: How have you seen that happen, the accountability piece of it?

Greg Kelly: It goes back to having it be included in executives’ reviews. A core part of their development. Prioritizing it. We’ve seen some leading companies prioritize it as one of the top three [areas] that leaders are accountable for. When you do that, they tend to pay attention and make progress.

Kweilin Ellingrud: Absolutely. Put your money where your mouth is, right? Wonderful. And, Greg, you live in Atlanta, right? You’ve written a lot about how Atlanta has thrived economically over the past few years. But the rest of the state has struggled to keep up with the growth rates and economic inclusion in Atlanta. How do you think we can better address these disparities both in Georgia and across the country?

Greg Kelly: I do love Georgia, and I love Atlanta. Georgia has made real progress. I should start with that. It’s gone from being the fifteenth- to the ninth-largest state economy from 1979 to 2019. It has the world’s second-busiest airport, two major container ports, great roads, great rail networks. So a fantastic state and fantastic progress.

You’re right, though. We did write about what got us here won’t get us there—that more is needed. And it starts with infrastructure. We do need more infrastructure. Hopefully, the latest national support in infrastructure will help, but we really need to invest more in infrastructure in Georgia. A related topic that some also include in that infrastructure, but we’d call out separately, is the broadband expansion. Expanding broadband throughout Georgia is a critical driver for success across Georgia. A third is in reskilling. You mentioned in your introduction that you’re part of our McKinsey Global Institute, which looks at this, of course. But I haven’t seen as much written about how our workforce population growth is really going to be lower looking forward. Maybe the lowest it’s been, really, since our country was founded. That’s a national trend. It’s also a Georgia trend. The workforce in Georgia participates at a lower rate than the rest of the country.

So reskilling, providing childcare, providing better education are all key to great labor-force participation in Georgia, and it’ll be key for Georgia’s success. And finally, supporting younger, faster-growing companies is a real opportunity for Georgia to drive higher growth. Some of those same things apply in Atlanta as well, but are especially critical for Georgia more broadly.

Kweilin Ellingrud: Greg, I think a lot of the themes that you emphasized are absolutely applicable more broadly across the country. Broadband access, right? Making sure that workers in rural areas have the access and connectivity to be able to connect to a whole new set of jobs that even two years ago, pre-COVID-19, probably wouldn’t have been available. To connect and reskill and upskill because I think the challenge in our current economy is we have quite a few jobs. Millions of jobs. We also have a number of people now looking for them. But there’s a mismatch in the jobs and the skills that we need on the one hand, and the skills of the workers that are remaining and looking for those jobs on the other. So how do we upskill and better match in our labor markets?

Greg, thank you for sharing your insights with us today. I loved the “and” elements of growth and sustainability and inclusion, and the fact that you emphasize that we’re all on a learning journey, and we can each get so much better. Whether you’re the CEO of a consumer products company or you work in a very different role, the continuous-improvement journey across those dimensions is so important.

Tangible steps to accelerate sustainable and inclusive growth

Kweilin Ellingrud: We’re going to be wrapping up each of our Future of America episodes with a rapid-fire Q&A session. Greg, you’re the first one up for this.

Greg Kelly: Lucky me.

Kweilin Ellingrud: Greg, is there a book or an article that you’ve read recently that excites you about sustainable and inclusive growth in the future?

Greg Kelly: Maybe I’ll take the inclusion side of that, Kweilin. I just watched The Tender Bar . I don’t know if you saw that movie come out in December. And as is usually the case, I watched it with my wife. And she said, “Ah, it was pretty good, but the book was better.” How many times do we hear that the book was even better? So that was a good catalyst for me to get the book. I’m sure many of our listeners read [the book] when it came out in 2005, so it’s old news to them. But if you haven’t, it’s a wonderful story. J. R. Moehringer is the author. He writes of his own coming of age. He grew up without his father present, so his real inspiration came from a wide cast of characters in the bar that his uncle ran. To me, it’s a good example of taking inspiration from a wide variety of people and a real testament to the power of inclusion.

Kweilin Ellingrud: Greg, what makes you optimistic that we can get there? That we can really achieve sustainable and inclusive growth going forward?

Greg Kelly: It goes back to the transparency that I mentioned at the beginning, Kweilin. The fact that consumers and customers do have that transparency into how companies operate today. And they’re going to hold companies accountable. They’re going to hold our government leaders accountable. So the fact that we have that transparency actually gives me optimism that we’re going to make progress.

Kweilin Ellingrud: More people know, and they’re also voting with their feet. So what is the one thing listeners can do today to promote sustainable and inclusive growth?

Greg Kelly: With that transparency, support those companies and leaders that are sustainable, inclusive leaders.

Kweilin Ellingrud: Wonderful, Greg. Thank you for joining us today. We appreciate your insights.

Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.

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Lessons learned from the breadth of economic policies during the pandemic

The COVID-19 pandemic resulted in the sharpest and most synchronized reduction in global economic activity in history. The U.S. economy experienced a V-shaped recovery of a type not seen in recent recessions. The rapid recovery was due to two factors. First, the recession itself was caused by a shock associated with COVID-19; as that shock retreated—and people learned to better live with the pandemic—the economy was poised to recover quickly, just as it typically does after natural disasters. Second, the policy response protected household incomes and kept many businesses intact so that they were in a position to resume more normal levels of economic activity when it was safe to do so.

Recession Remedies podcast episode: What should we learn from the economic policy response to COVID-19?

Real disposable personal incomes actually rose in 2020 and 2021 as transfer payments from the government vastly exceeded lost incomes from other sources. As a result, poverty, after accounting for taxes and transfers, fell in 2020 to the lowest level since the data series began in 1967. Initially, observers and policymakers worried that a cascade of bankruptcies and defaults could precipitate a financial crisis. But improvements to make the financial system more resilient in the wake of the global financial crisis and the policy response to the COVID-19 crisis quickly addressed potential issues. 

The economy experienced major side effects from the pandemic and associated policy response, most notably the highest inflation rate in 40 years, far outpacing the increase in wages and leading to the largest real wage declines in decades. Ultimately, the economic policy response to the COVID-19 recession should be judged not just by its consequences in the spring of 2020, not what happened over the next two years, but also by the longer-term effects, and whether the response will prove to have contributed to a stronger and more sustainable economy going forward. 

Evidence on the COVID-19 economic policy response  

• The initial fiscal response in the U.S. was large. It waned in mid-2020 and then surged again in late 2020 and early 2021.
• Economic Impact Payments, Unemployment Insurance, forbearance programs on mortgages and student loans, and an enhanced CTC played the largest roles in lifting household finances, while businesses received support largely through grants and subsidized loans.
• Even after the initial substantial fiscal assistance, observers generally expected a much slower economic recovery from the second quarter 2020 trough than actually came to pass.
• The U.S. government incurred substantial debt. Moreover, inflationary pressures and the efforts to moderate those pressures might bring an end to the expansion.
• The U.S. fiscal response appears to have been larger than any other country.

Lessons learned from the breadth of economic policies during the pandemic  

Policymakers should take the lesson from the past two years that vigorous fiscal and monetary policy can boost income for most households and disproportionately for lower-income households and can speed economic recoveries. However, doing too much can have serious downsides that might be difficult to mitigate.

Macroeconomic support for an economy deep in recession with many underused resources can increase output and employment with little effect on inflation. But as the economy gets closer to its capacity, additional macroeconomic support will feed increasingly into inflation instead of improvements in output and employment. Going forward, the magnitude and timing of the response should be improved through more automatic stabilizers, and the targeting of the response should be as well. The good news is such responses can be implemented efficiently if policies are developed in advance of a crisis.

Policymakers should take the lesson from the past two years that vigorous fiscal and monetary policy can boost income for most households and disproportionately for lower-income house-holds and can speed economic recoveries.

It is important to draw lessons not just from what happened, but also from what did not happen during the COVID-19 recession: for example, there was no financial crisis in the United States or worldwide. The initial, robust response by monetary policy-makers was critical to keeping the financial sector on an even keel. Better preparation in the form of more robust and stress-tested balance sheets for banks prior to the recession also helped.

The preexisting social safety net is inadequate in the face of recessions: it is not generous enough and has too many gaps, which is why it needed to be supplemented by policy action both in the Great Recession and to a much greater degree in the COVID-19 recession. Additional automatic stabilizers are likely part of the answer but are unlikely to be sufficient to avoid the need for well-timed and wise discretionary fiscal responses in the future.

It is still not clear what policies would work better in the United States to lessen the impact of a GDP decline on employment and preserve worker attachment to their employers. Job retention schemes were heavily utilized in European countries compared to state-based work sharing programs in the U.S.—these programs should be explored in greater detail for future downturns.

For more information or to speak with the authors, contact:

Marie Wilken

202-540-7738

[email protected]

About the Authors

Wendy edelberg, director – the hamilton project, jason furman, former brookings expert, timothy geithner, president – warburg pincus.

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Outcomes among patients with chronic obstructive pulmonary disease after recovery from COVID-19 infection of different severity

• Kwok, Wang Chun
• Chau, Chi Hung
• Tam, Terence Chi Chun
• Lam, Fai Man
• Ho, James Chung Man

While studies have suggested increased risks of severe COVID-19 infection in chronic obstructive pulmonary disease (COPD), the persistent and delayed consequences of COVID-19 infection on patients with COPD upon recovery remain unknown. A prospective clinical study was conducted in Hong Kong to investigate the persistent and delayed outcomes of patients with COPD who had COVID-19 infection of different severity (mild-moderate COVID-19 and severe COVID-19), compared with those who did not. Chinese patients with COPD ≥ 40 years old were recruited from March to September 2021. They were prospectively followed up for 24.9 ± 5.0 months until 31st August 2023. The primary outcome was the deterioration in COPD control defined as the change in mMRC dyspnea scale. The secondary outcomes included the change in exacerbation frequency and non-COVID-19 respiratory mortality (including death from COPD exacerbation or bacterial pneumonia). 328 patients were included in the analysis. Patients with mild-moderate and severe COVID-19 infection had statistically significant increased risks of worsening of mMRC dyspnoea scale by increase in 1 score from baseline to follow-up with adjusted odds ratios of 4.44 (95% CI = 1.95–10.15, p < 0.001) and 6.77 (95% CI = 2.08–22.00, p = 0.001) respectively. Patients with severe COVID-19 infection had significantly increased risks of increase in severe COPD exacerbation frequency with adjusted odds ratios of 4.73 (95% CI = 1.55–14.41, p = 0.006) non-COVID-19 respiratory mortality from COPD exacerbation or pneumonia with adjusted hazard ratio of 11.25 (95% CI = 2.98–42.45, p < 0.001). After recovery from COVID-19, worsening of COPD control from worsening of dyspnea, increase in severe exacerbation frequency to non-COVID-19 respiratory mortality (COPD exacerbation and pneumonia) was observed among patients with severe COVID-19. Mild to moderate COVID-19 was also associated with symptomatic deterioration.

• COPD control;
• COPD exacerbation

• DOI: 10.1088/1755-1315/1347/1/012041
• Corpus ID: 270665681

Impact of covid-19 on construction projects: challenges and opportunities

• M. Abushammala , S. Farrag
• Published in IOP Conference Series: Earth… 1 June 2024
• Engineering, Business, Environmental Science
• IOP Conference Series: Earth and Environmental Science

12 References

Covid-19 and undeclared work: impacts and policy responses in europe.

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Impact of COVID‐19 on health and safety in the construction sector

Who is responsible for construction safety in australia a stamp analysis, emergency remote teaching during coronavirus pandemic: the current trend and future directive at middle east college oman, coronavirus disease of 2019 (covid-19) in the gulf cooperation council (gcc) countries: current status and management practices, labor demand in the time of covid-19: evidence from vacancy postings and ui claims, clinical features of patients infected with 2019 novel coronavirus in wuhan, china, evaluating attitudes to safety leadership within rail construction projects, covid-19 in the middle east and north africa: reactions, vulnerabilities, prospects, related papers.

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Election latest: Love Actually star backs Green candidate in key contest - as minister hints at bid to replace Sunak

Rishi Sunak's future as Tory leader is already being publicly speculated upon by a minister who could run for the job if the party loses the election. Meanwhile, the Greens have attracted a Hollywood endorsement - and Sky's Sophy Ridge has a fresh interview with Sir Keir Starmer.

Thursday 27 June 2024 19:48, UK

• General Election 2024

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• Politics Hub With Sophy Ridge is live - watch in stream above
• Starmer defends plan for VAT on private schools
• Analysis: Labour campaign has a central paradox
• Hugh Grant backs Greens co-leader in key contest
• Sunak won't say if he told aide election date before bet
• Exclusive: PM's top adviser interviewed by Gambling Commission
• Live reporting by Charlotte Chelsom-Pill and (earlier)  Ben Bloch

Election essentials

• Manifesto pledges: Conservatives | Greens | Labour | Lib Dems | Plaid | Reform | SNP
• Trackers:  Who's leading polls? | Is PM keeping promises?
• Campaign Heritage:  Memorable moments from elections gone by
• Follow Sky's politics podcasts:  Electoral Dysfunction | Politics At Jack And Sam's
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By Ashna Hurynag , news correspondent

The battle for Scottish votes is all to play for.

An exclusive YouGov poll for Sky News has Labour on 35% in Scotland and the SNP on 29%.

The latter are closing the gap, but if all goes this way on the night, such a result would mean big gains for Labour.

But the biggest gutter punch is dealt to the Conservatives who YouGov has on 11% and level with the Lib Dems.

But attitudes change when voters consider where to cast their ballot in the 2026 Holyrood elections.

As of the 18 June, voter intentions shifted to 28% for the SNP, 24% Labour, 10% Conservatives and 7% for the Lib Dems.

This tells us Scots treat UK and Scottish elections differently. 

It also suggests the former creating an opportunity for a protest vote - a cry of frustration at 14 years of Tory governments at Westminster, or the firing of a warning shot at the SNP’s record after 17 years at Holyrood.

But so many are still undecided.

1,059 people over 16 were surveyed by YouGov between the 20 and 25 June, exclusively for Sky News, and 14% of people surveyed have changed how they plan to vote over the past four weeks.

Of those, 37% say it was down to how the parties and their leaders have conducted themselves.

The NHS and health care are the key issues, followed by the cost of living next, the economy in general, immigration, and Scottish independence.

Rishi Sunak's most senior adviser in Downing Street has been interviewed in the investigation into bets by Conservatives on the date of the general election.

Liam Booth-Smith, Downing Street chief of staff, was interviewed last week by senior Gambling Commission officials and questioned about who knew about the timing of the election.

Sources have emphasised to Sky News that Mr Booth-Smith is not a suspect in the gambling investigation and was interviewed as a witness and was "asked for help".

Described as the prime minister's most trusted ally, Mr Booth-Smith has worked for Mr Sunak since he was chancellor, when his fondness for leather jackets earned him the nickname "the Treasury Travolta".

According to a Gambling Commission insider, Mr Booth-Smith was interviewed by "senior officials within the Gambling Commission, more senior than investigators".

Sky News has also been told there are currently no plans to interview the prime minister as part of the investigation into bets on the election date.

Read more here:

Sir Keir Starmer's interview with Sophy Ridge hits on the central paradox of the Labour campaign, Sky's deputy political editor Sam Coates says. 

Sam says there is an "incredibly high level of ambition" in Labour's "chunky manifesto" and the "rhetoric couldn't be bigger".

And yet, "the first steps that take you to the missions are small". 

Sam adds that what we may discover should Labour form the next government is that "we don't know what the second and third and the fourth step are going to be". 

Sky's election commentator Adam Boulton adds that Sir Keir was "not overpromising in any area, but making it clear he has his priorities".

"I think people going to have to get used to this. He is going to be someone who sticks to his course," Adam adds.

"He's going to be quite deliberate in his approach."

Sophy ends the interview by asking Sir Keir which is more likely -  Labour winning the election or England winning the Euros. 

He replies: "Well, I can't have both I don't suppose?"

More seriously, he adds the "more important one is winning the election".

"But don't let that be any sort of reflection... I say get behind the team when it comes to England and the players."

Despite topping their group, some fans have been left disappointed by England's Euros performance.

Earlier, Sir Keir told Channel 5 News's Dan Walker he believes England will still be in the competition by the time the election comes round on 4 July.

He said England normally start "a bit wobbly in these competitions" but have a "brilliant set of players", adding that he's "backing them all the way".

An "element" of the backlash against Labour's plans to impose VAT on private schools is driven by those in Westminster and the media with ties to such schools, Sir Keir Starmer tells  Sophy Ridge . 

He was responding to a question on whether criticism over the policy - which Sophy says polls quite well - has been because there are so many in Westminster and the media who either went to a private school or send their children to one. 

"I think there's an element of that," he says.

Private schools 'will adapt'

Addressing the criticism, the Labour leader says there is "no evidence" private schools will be forced to close due to the plans.

"I think they will adapt," he said. "They've had lots of increases in costs over the last 14 years, and they've accommodated it.

"There's no evidence to show these schools will close. They don't have to pass the cost onto parents."

He added: "It's a difficult choice. But they're businesses in the end, and they're very successful in the round.

"I want them to thrive. But we need to make this choice, because in the end, if I want the teachers we need in our state secondary schools, I have to answer the question you would put to me, just how are you going to pay for that?

"You're going to pay for that by getting rid of the tax breaks for private schools, and use it to invest in the teachers we need in our state secondaries."

You can read more on Sir Keir's exchange with Sophy on Labour's policy to see VAT applied to private schools here:

Sir Keir Starmer tells  Sophy Ridge  Labour are "ready" for government as he reveals what puts a spring in his step. 

Sophy asks him what keeps him going during the election campaign after Rishi Sunak said he gets through an "enormous" amount of sugar. 

"Coffee. Coffee. And then some more coffee," Sir Keir says. 

He adds that he's "not a big one for snacks", but is partial to "cheese sandwiches and tuna sandwiches" in the back of the Labour bus. 

"It's the high life, isn't it," he jokes.

'We're campaigning with a smile'

Asked whether he was still enjoying the campaign, he says: "Yeah. Four and a half years we've been working for this.

"I woke up with a smile on my face on 1 January because I knew we'd have an election this year.

"We're really pleased to be able to take this argument to the country. We're ready for this. We've got a positive offer to put for the country. 

"So we're campaigning with a smile and a spring in our step."

Plans to create tens of thousands of extra appointments to get NHS waiting lists down would be Labour's first priority in government, Sir Keir Starmer tells Sky's  Sophy Ridge  in the latest of her general election leaders interviews.

He also lists the recruitment of teachers and setting up Great British Energy among the top items on Labour's to-do list should they win the election on 4 July. 

He says Labour has "ambitious" plans to "hit the ground running", with many people feeling the country "has been left broken".

"Our job will be to come in to fix that," he adds.

"The first steps are going to be putting in place the plans for 40,000 extra appointments in the NHS to get the waiting list down each week. That's two million a year."

'Are you going to waste the opportunity?'

He describes these first steps as the  " down payment on the bigger change we need across the country".

Sophy puts to him polls are suggesting Sir Keir is about to be gifted a historic majority - the kind which in 1945 saw Labour prime minister Clement Attlee create the NHS.

She says his first steps seem quite small, asking "are you going to waste the opportunity?"

Sir Keir says his plans are "a first step to an NHS which is fit for the next 75/76 years". 

"I want to make sure that in the 50, 60, 70 years, people are celebrating the fact an incoming Labour government in 2024 made sure the NHS was not something you look proudly back on, but actually fit for the future."

One week today, Britain will be voting for the party they want to form the next government - and the person they want to be prime minister. ​

It's almost certain to be Sir Keir Starmer. 

Currently the leader of the Labour Party, by the end of next week he will very probably be our prime minister.

Today I sat down with him at a pottery factory in Stoke - where he stamped clay pots with his Change logo - and talked to me about everything from the NHS to climate change, private schools to the England Euros team.

We'll bring it to you here in the Politics Hub.

Our weeknight politics show  Politics Hub With Sophy Ridge  is live now on Sky News.

The fast-paced programme dissects the inner workings of Westminster, with interviews, insights, and analysis - bringing you, the audience, into the corridors of power.

Tonight, Sophy is joined by Labour's  Sir Keir Starmer  for the latest of her general election leaders interviews.

On Sophy's panel tonight are:

• Adam Boulton , Sky election commentator;
• Salma Shah , former Home Office adviser;
• Patrick Diamond , former head of policy planning under Tony Blair.

Watch live on Sky News, in the stream at the top of this page, and follow live updates here in the Politics Hub.

Watch  Politics Hub With Sophy Ridge  from Monday to Thursday on Sky channel 501, Virgin channel 602, Freeview channel 233, on the  Sky News website  and  app  or on  YouTube .

By Paul Kelso , business correspondent

Business Secretary Kemi Badenoch has compared Labour plans to require companies to introduce mandatory monitoring of the ethnicity pay gap to apartheid South Africa and the Myanmar regime.

Labour has pledged to extend full equal pay rights to ethnic minority and disabled workers if it wins power, matching the rights already extended to female workers.  

Addressing a British Chambers of Commerce conference, Ms Badenoch said the changes would lead to inspectors ticking which ethnic box people fell into. 

Challenged about the comparison with the apartheid regime, which used ethnic categorisation to underpin a racist system of white minority rule to restrict basic rights and freedoms, Ms Badenoch said ethnicity could not be tracked with the same clarity as the gender pay gap. 

"It will not work the same way in Northumberland as it does in Bradford," she said.

Ms Badenoch added while progress had been made on the gender pay gap, she did not believe it would ever be closed because of personal choices made by women choosing to have families.

'We are too left-wing'

Some businesses have expressed concerns about the cost of implementing Labour's plans for increased worker rights. 

Echoing the language used by Rishi Sunak in the final TV debate, she told business leaders not to "surrender" to Keir Starmer's party.

The business secretary also doubled down on her criticism of comments made about her by actor David Tennant ( see 16.43 post ).

Ms Badenoch, tipped as a candidate to succeed Mr Sunak as Conservative leader, said the party's problem with the challenge from Reform is "we are too left-wing".

She said the Conservatives should not cooperate with Reform, who she described as "one man and some odds and sods".

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