Implications of Major Adverse Events on Productivity

Since 2000, there have been three major global slowdowns, with the latest and most pronouncedepisode triggered by the COVID-19 pandemic. At the same time, many countries have faced major adverse eventsincluding natural disasters, wars, and financial crises, all of which can lead to long-lasting harm to productivity. Warsinflict particularly severe damage to productivity, while financial crises also lead to substantial losses, especiallyaccompanied by a rapid build-up of debt. The greater frequency of natural disasters, especially climatedisasters, means that they have the largest aggregate impact on productivity, as natural disasters have occurred mostoften and their frequency has doubled since 2000. Global adverse events can have large sustained negative effects onproductivity through dislocating labor, tightening of credit, disrupting value chains, and decreasing innovation.Policies to counter the negative consequences of adverse shocks include accommodative fiscal policies, such asreconstruction spending on resilient infrastructure; transparent governance; efficient use of relief funds; aswell as growth-friendly structural reforms. Appropriate policies and regulations concerning finance, construction,and environmental protection can help reduce the frequency of adverse shocks.