This is what chief economists think about the global economy right now

We need to broaden the set of targets we use to define success as we rebuild the global economy after the pandemic.

That view is among the insights from the World Economic Forum’s latest Chief Economists Outlook – Emerging Pathways Towards a Post-COVID-19 Reset and Recovery. For the report, the Forum asked its community of nearly 40 leading chief economists to assess the current economic outlook and consider how business leaders and policymakers need to respond.

The report identifies three key emerging challenges facing governments and business leaders as the world enters the recovery phase. These are: retooling economic policy to reduce inequality and improve social mobility; identifying new sources of economic growth; and aligning on new targets for economic performance.

“Recent events have brought about a long overdue conversation about future growth. As we emerge from the crisis, the quality and direction of economic growth must take primacy over its speed. In this new paradigm, we need metrics beyond GDP and an updated policy toolkit to ensure that future growth is inclusive, sustainable, and provides opportunity for all”, said Saadia Zahidi, Managing Director, World Economic Forum.

But what needs to be overcome to respond to these challenges? Here are five things chief economists think about the crisis and potential paths to recovery.

1. Stock markets may be too optimistic about the speed of recovery

With real economy data and stock markets painting very different pictures, unemployment figures are a better guide to the global economic outlook than the current high of financial markets, according to most of the chief economists questioned for the report.

While financial markets have been encouraged by early signs of recovery in consumer spending and industrial production, both remain far below past levels and the recovery could still be derailed by a new wave of lockdowns. Markets may also not fully appreciate that firms protecting their profits by shrinking their workforce and reducing investments may lead to more unemployment, less innovation and less consumer spending in 2021.

The overall labour outlook remains highly uncertain. However, unemployment in the US has been falling more slowly than expected and may worsen in Europe as job protection measures scale back over the summer.

2. We’re at a unique moment to tackle inequality

Inequality has accelerated in recent years as the gains from technological change and global integration have not been evenly distributed. COVID-19 has reinforced some of these patterns since it had a disproportionate impact on the most vulnerable. How the financial burden is shared in the future will be critical.

But for all the chaos it’s caused, the pandemic has opened a window of opportunity. As the Chief Economists Outlook says, the hiatus imposed by the crisis has created a unique moment to introduce far-reaching systemic change to prevent inequality spiralling further out of control.

This will involve governments monitoring inequality alongside other targets, upgrading social protection measures to safeguard against future shocks, and helping to develop socio-economic mobility in the new economy. A slight majority of the chief economists surveyed see some form of unconditional basic benefits – such as Universal Basic Income – forming part of the policy toolkit after the crisis.

3. Rethinking tax could help governments build public trust

The chief economists also agreed strongly on the role of tax in addressing the inequality the pandemic has accelerated. Adapting tax architectures is seen as an urgent requirement, including continuing efforts to curb tax evasion, settling on an international agreement to fairly tax digital activity, as well as rethinking wealth taxes and higher marginal income taxes.

As tough choices are made about how to pay off soaring debt levels accumulated by government support schemes during the recovery, there is a big opportunity for governments to regain the trust of citizens whose chances of advancing economically have been dwindling for many years.

“A world in which coronavirus debts are repaid by a wealth tax or a global crackdown on corporate tax havens would look very different from one in which benefits are slashed and VAT is raised,” said Adam Tooze.

4. Supply chain disruption could hamper developing economies

The pandemic has added to existing uncertainty in international trade caused by factors like trade disputes and tensions over technology standards. And while reductions in the trade of physical goods due to lockdowns may be temporary, developing economies could suffer if firms take action to increase resilience in their supply chains by bringing critical parts back home or sourcing from several countries in parallel.

A move towards greater self-sufficiency as multinationals could do long-term damage to trading ties between high- and low-income countries. It remains to be seen, the report says, if businesses will be ready to give up efficiency for resilience. But uncertainty about the pandemic, geopolitical tensions and climate change-related events could cause more supply chain disruptions.

There is a “high likelihood” of supply chain transformation leading to a reversal of international economic convergence, according to respondents. This would force developing economies to reconsider their growth models.

But one opportunity for emerging markets rests in the global acceptance of remote working – meaning nations could offer competitively priced services and imagine a new economic development model, which also entails a higher investment in human capital.

5. With the right action, new growth markets could emerge

The crisis is also expected to impact innovation, another key driver of long-term economic progress next to global integration.

Innovation is critical to overcoming the impacts of the pandemic and addressing inequality and the climate crisis. But it could suffer as economic contraction threatens research and development resources.

Governments can put economic progress on the right track with robust innovation and investment strategies, but this will require a deep transformation across all sectors. It will only be possible if public and private organizations work together and governments get actively involved in reshaping existing sectors and building new markets.

These new frontier markets – which range from green energy and the circular economy to health, education and care – could have a transformative impact on economies and societies, the report says.

Societies today have have a unique window of opportunity to move on to a more inclusive and greener growth path, according to the report.